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Infinera's Data Deluge Bet

Scott Moritz

The Sunnyvale, Calif., tech shop makes chips that handle multiple-colored light waves used to carry traffic on optical networks. The company has caught the attention of industry observers who see the technology as a cheaper, more efficient method of managing greater volumes of data over network pathways.

The company, originally named Zepton Networks, was co-founded by Jagdeep Singh, who was named CEO in 2001. Among Singh's earlier accomplishments was the sale of a company he ran named Lightera to Ciena (CIEN Quote) in 1999 for $500 million. Lightera provided the foundation for Ciena's popular CoreDirector optical switch.

Like many tech upstarts, Infinera is phenomenally unprofitable. Last year, the company lost $89.1 million on $58.7 million in sales. Its total accumulated loss as of the end of last year was $313.1 million.

And as happens occasionally in tech, Infinera has been charged with patent infringement. Last year, Cheetah Omni sued Infinera over patents related to gear sold to Level 3 (LVLT Quote). Infinera filed a response denying the infringement claims.

Investors are likely to see Infinera as a sort of flashback to a time before the telecom boom collapsed in 2000-01. Back then, optics held great promise and -- for a few brilliant years -- names like JDSU (JDSU Quote), Nortel (NT Quote) and Corning (GLW Quote) delivered eye-popping returns.

Infinera's photonic chips convert optical signals to digital and back to optical. And since it operates with multi-colored light known as wave division multiplex, or WDM, the systems can handle eye-popping speeds of up to 100 gigabits a second, or 10 times the going rate, at a fraction of the scale and power consumption of conventional optical gear.

The company says its equipment is compliant with "major international standards," but typically new gear needs to pass certification with industry standard bodies before big phone giants like AT&T (T Quote) and Verizon (VZ Quote) will consider purchases.

To date, the company has sold gear to 25 telcos including Global Crossing (GLBC Quote), Level 3 and Qwest (Q Quote).