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Vitesse ends work on upcoming 10Gb, 40Gb chips

Posted: 26 Jul 2002 ?? ?Print Version ?Bookmark and Share

Keywords:Vitesse Semiconductor? network processor? PHY products? Resilient Packet Ring networks? networking chips?

Vitesse Semiconductor Corp. is trimming its product lines, excising those whose prospects have withered in the telecom recession, CEO Louis Tomasetta told EE Times.

In an interview Tuesday (July 23), Tomasetta said that Vitesse is cutting several R&D projects, including a 10Gbps network processor, which already had been postponed, a 10Gbps traffic manager, 40Gbps PHY products, and chips for resilient packet ring (RPR) networks.

The market for these products looked unstoppable three years ago, but a hard look at the numbers convinced Vitesse that those products' expense could not be justified in today's market. Vitesse announced last Thursday (July 18) that it would make cuts, including a layoff of 200 of its 1,160 employees.

Vitesse is hardly alone in reconsidering plans made during the boom. For example, PMC-Sierra Inc. bet big on networking chips such as switch fabrics, only to shutter many of those projects in 2001 as the economy soured.

"Everybody in our space had these grandiose ideas of trying to do everything for everybody. Customers are no longer as interested in adding advanced features as they are in reducing cost," Tomasetta said.

Vitesse generally green-lights a product if its revenues will measure 10 to 20 times its development costs, Tomasetta said. Given the changed market, the company recalculated those numbers for its entire product road map, including products that wouldn't begin development until 2003 or 2004.

Products such as the 10Gbps network processor, scheduled to begin development this fall, did not make the cut.

"It would cost us $15 million to $20 million to bring that product to market. We had a hard time [foreseeing anything] close to $200 million in revenues in the three years after we shipped this product," Tomasetta said. "We did the same kind of thing with our 40Gbps PHY-layer products. They work, we've shown them, but we'll put the engineers on something else, [something that] customers will buy a year or two from now."

In the case of RPR, Vitesse sees a lot of interest among service providers but few projects that will be completed soon enough. "We can't identify enough customers that are going to deploy it in the next two years," Tomasetta said.

No turning back

Tomasetta rejected the option of completing these products in advance of a market recovery. "In three years, if the market picks up in this space, the requirements for these customers will probably be different," he said. A product completed now, in anticipation of those 2005 or 2006 sales, would probably be "inferior" to its up-to-date competitors, he said.

In general, Vitesse is shifting its sights away from the network core. Tomasetta sees growth coming in areas such as storage, switch fabrics, Ethernet LANs and fiber-optic MANs. "The further [a market is] from the long-haul core, the sooner the recovery is going to be," Tomasetta said.

He emphasized that Vitesse has worked hard to diversify from its core-networking roots. Five years ago, about half the company's business came from the long-haul networking units of Nortel, Fujitsu, Alcatel, and Lucent. Today, Vitesse's largest customer is Cisco, representing 10 percent of revenues, he said.

Separately, Vitesse continues on a trajectory to become fabless. Vitesse relied on its GaAs fabrication facilities in years past, but it gets 77 percent of its revenues from foundry-built CMOS devices today, Tomasetta said.

Vitesse still operates a GaAs fab in Colorado Springs, Colorado. That facility won't be closed "for the foreseeable future," but Vitesse is mulling options for separating from the fab, Tomasetta said. One possibility is that the facility could become a foundry, run by another company, with Vitesse paying for capacity as it would at any other foundry.

Vitesse has already retired the GaAs fab at its headquarters in Camarillo, California, which was converted into an InP development facility.

? Craig Matsumoto

EE Times

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