Optical vendors including Cisco, Marvell, Lumentum, and Adtran swallowed their rivals and/or suppliers this year to take advantage of an unprecedented investment cycle driven by demand for better broadband infrastructure and higher speed connectivity.
The overall optical transport market will reach nearly $18 billion in sales by 2025, according to Dell’Oro Group’s recent report.
In addition, government support also bolsters market growth, including the $65 billion funding from the United States’ infrastructure bill to improve the nation’s broadband capabilities which will rely heavily on expanding the reach of optical line systems.
Here is a look back at the top five deals in the optical market for 2021.
Cisco Acquires AcaciaCisco completed the acquisition of Acacia Communications in March. The small optical firm was Cisco’s supplier prior to the deal. Acacia produced coherent optical interconnect products for webscale companies, service providers, and data center operators, including Cisco.
Cisco originally announced plans to buy Acacia for $2.6 billion in July 2019, however, the deal was delayed by regulator, which eventually pushed the purchase price to $4.5 billion.
Bringing Acacia’s coherent optical technology in house is a key component of Cisco’s Internet for the Future strategy and its plans to move deeper into the 5G infrastructure market.
The acquisition was not only the most significant optical buy of 2021, but also the most disruptive, Dell’Oro Group VP Jimmy Yu argued. “It furthers the vertical-integration trend where optical systems manufacturers have increasingly designed and produced their own high-end optical components rather than buying from third-party component suppliers.”
Acacia was considered the most advanced coherent digital signal processor (DSP) vendor, and commanded approximately 75% of the market for DPS, Yu said. As an added bonus, Cisco secured a ready source of 400ZR optical modules as part of the deal.
The deal helps Cisco supply layer 0-3 systems, which gives Cisco a cost-price advantage over the other large systems manufacturers, he added.
Marvell Swallows InphiMarvell Technology acquired rival chipmaker Inphi for roughly $10 billion in cash and stock options in April.
Inphi is a U.S.-based chipmaker specializing in optoelectronic interconnects, commonly used in cloud data centers, where the company can provide up to 800 Gb/s of throughput. Marvell boasts the combined company represents nearly $40 billion in market value and covers an addressable market worth more than $20 billion a year.
“Together we will have the portfolio, capabilities, and scale to expand Marvell’s leadership in its key growth markets of 5G, cloud and automotive,” Marvell President and CEO Matt Murphy said in a statement. “I am also pleased that we are now organized as a U.S. company and we look forward to continuing to drive innovation in semiconductor technology critical to the nation’s data economy.”
Inphi also expands Marvell's optical portfolio. Yu listed Marvell-Inphi, Cisco-Acacia, NeoPhotonics, Ciena, and Nokia as currently available or potential 400ZR pluggable optical vendors.
Lumentum Buys NeoPhotonicsPhotonics vendor Lumentum acquired rival NeoPhotonics for $16 per share in an all-cash deal valued at roughly $918 million in November. The deal is expected to close in the second half of 2022.
NeoPhotonics is a laser and optoelectronic component vendor targeting cloud, hyperscale, internet content provider, and telecom networks.
Lumentum claims the transition will help expand its presence in the more than $10 billion market for high-speed optical components used in cloud and telecom network infrastructure. Executives expected the combined company to deliver more than $50 million in annual run-rate cost synergies within 24 months of the transaction's close.
“The increasing global demand for our ultra-pure light tunable lasers and photonics technologies for speed-over-distance applications is more apparent than ever, and Lumentum is the ideal partner to serve our customers on a larger scale,” NeoPhotonics President and CEO Tim Jenks said in a statement.
Adtran Absorbs ADVAAdtran acquired German telecommunications equipment vendor and rival ADVA Optical Networking in a deal valued at $931.1 million in August. The deal is expected to close in the third quarter of 2022.
Adtran offers fiber access, fiber extension, and subscriber connectivity products. ADVA , meanwhile, provides network equipment for metro wavelength division multiplexing (WDM), data center interconnect, business ethernet, and network synchronization.
The two vendors separately produced a combined $1.2 billion in revenues last year. However, Adtran’s own presentation in support of the deal showed that market heavyweights Nokia and Ciena banked $3.9 billion and $3.5 billion, respectively, over that same time period. Analysts argue that the new combined company would still be just a “niche player” in the market.
“Adtran and ADVA are going to improve their position in combination, [but] don’t really threaten the large players,” LightCounting Principal Analyst John Lively told SDxCentral in an earlier interview.
Companies that are potentially threatened by this deal are smaller competitors such as Infinera ($1.4 billion in 2020 revenues) and Calix ($500 million in 2020 revenues), Lively noted.
Ciena Takes Over AT&T’s Vyatta AssetsCiena took over AT&T’s Vyatta virtual routing and switching technology in November, which bolstered its edge and 5G capability expansion. Financial terms were not released for the deal.
AT&T is Ciena’s largest single customer, and the two companies have had a close relationship for more than two decades, Ciena CEO Gary Smith told SDxCentral in an earlier interview.
“We’d bet heavily on our switching and routing portfolio to address what we think is an opportunity for us in this new emerging metro edge cloud market,” he said, adding that the Vyatta team will help Ciena on developing virtual routing and switching technology and associated software.
The Vyatta platform provides an operating system to run network servers. AT&T initially acquired it from Brocade in 2017, and it used those assets to help power the operator’s ambitious SDN and network virtualization goals. It later donated the open source Disaggregated Network Operating System (DANOS) code from the Vyatta platform to the Linux Foundation.