CALIENT Technologies, Inc.

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January 13, 2014 Issue

The Most Powerful Name In Corporate News and Information


Highest Port Density and Effective Power Dissipation Optical Circuit Switching

About CALIENT Technologies, Inc.:

Headquartered in Santa Barbara, Calif., CALIENT Technologies is the global leader in adaptive photonic switching with systems that enable dynamic optical layer optimization in next-generation data centers and software-defined networks. CALIENT’s 3D MEMS switches have demonstrated years of reliability, with eight years of successful continuous operation. With more than eighty thousand optical terminations shipped, CALIENT has one of the largest installed bases of photonic switches worldwide. The company designs and fabricates its systems using the state of art MEMS equipment in its own fabrication facility located at its corporate headquarters.

Atiq Raza

Atiq Raza serves as the Chairman and Chief Executive Officer at CALIENT Technologies Inc. He also serves as a Senior Advisor at Telesoft Partners. Mr. Raza has been working in various engineering leadership and senior management positions in Silicon Valley for the last thirty-three years.


Previously, he was the Founder and Chief Executive Officer at Raza Microelectronics Inc., which was acquired by NetLogic in October 2009 and was the Chief Technology Advisor to NetLogic prior to their merger with Broadcom. Mr. Raza was the President, Chief Operating Officer, and Director of Advanced Micro Devices (AMD). He laid the foundation of AMD’s processor roadmap, brought the AMD-K6 and Athlon™ family of processor products to the market, and established the Opteron 64-bit instruction set architecture. Mr. Raza became part of AMD's management team after the merger with NexGen, Inc. in January 1996. At NexGen, he was the Chairman and Chief Executive Officer. Prior to NexGen, Mr. Raza held various management positions at VLSI technology Incorporated, most notably the Vice President of Technology Centers. He serves as the Chairman of the Board at Validity and as a Member of the Advisory Board of Silicom Ventures LLC. Mr. Raza also serves on the Board of Directors of MetaRam, Seeo Inc., Validity Sensors, Inc., AMI Semiconductor, Mellanox Technologies, Inc., SiByte, Siara, VxTel, Magma, eASIC, Solantro, and TRG. He served as a Director of Advanced Micro Devices. He also serves on the Stanford University School of Engineering Advisory Board and on Samsung's Strategic Advisory Board


Mr. Raza has several degrees, including a Master’s degree in Materials Science and Engineering from Stanford University, a Bachelor’s degree with honors in Physics from Punjab University, with a double Bachelor’s degree in Philosophy, and a Bachelor’s degree in Electrical Engineering with honors from the University of London.

“Therefore, what we have is a crucial building block for the data center, which does not really have any competition and which can enable significant economic benefits and significant operational benefits in one of the most important segments of the growing industry. That makes CALIENT a very important company.”-AtiqRaza


Optical Circuit Switching


CALIENT Technologies, Inc.
25 Castilian Drive
Goleta, CA 93117



Interview conducted by: Lynn Fosse, Senior Editor, CEOCFO Magazine, Published – January 13, 2014

CEOCFO: Mr. Raza, what is the concept at CALIENT Technologies?

Mr. Raza: CALIENT makes a product that is called an optical circuit switch or photonic switch. Both those terms are used to describe the same exact product. The product is relatively unique. There are other companies that make similar optical circuit switches, but CALIENT distinguishes itself by having the highest port density and the most effective power dissipation and probably the best economics.


CEOCFO: Would you explain how it works? What is actually happening when your product is used?

Mr. Raza: One of the most important applications where the product is now being used is inside the data center. Data centers have been growing very rapidly in scale and are now being managed with software. By now, virtually everyone has heard the terms software-defined network and software-defined data center. The CALIENT product is extremely well positioned to play a transformative role in the new data center construction and how the data is moved around in the large data centers.


CEOCFO: How is the data moved now? What is added or what is the advantage with CALIENT?

Mr. Raza: Right now, data is transported using packet, also known as Ethernet, switches. In the datacenter, these switches move data from one set of servers to another set of servers. What has changed is threefold. One is that the amount of traffic coming into data centers has multiplied dramatically with the emergence of the smartphone. That is because smartphones themselves are really very powerful computers in your pocket. Therefore, they spew out enormous amounts of information and they receive enormous amounts of information. The second trend is the role of video. We, in front of our eyes, have gone from tapes to DVDs and from DVDs now to streaming video. Streaming video has become a very large part of the entire data movement in data centers. The third thing is that with software-defined networking, which is software controlling a data center rather than human beings controlling a data center, there is a something called virtualization. Virtualization requires large amounts of data to be moved within the data center simultaneously. The existing movement of data to packet switches basically saturates the total capacity of the packet switches. Optical circuit switches like those produced by CALIENT enable a bypass of nearly infinite capacity to be able to move that data. Therefore, it supports the video, it supports the traffic that is enabled by smartphones and it supports virtualization, which is a very important part of software-defined networks and software-defined data centers.


CEOCFO: Are the people that should know about CALIENT aware?

Mr. Raza: Yes. Obviously, the first thing is that the people who understand it right away are the ones who are on the front line of this transformation. While I am reluctant to mention names, the names of the companies that understand it right away and have the greatest amount of need are the companies that are building the largest data centers in the world. Those are the guys who basically immediately have the greatest need and understand how to utilize it.


CEOCFO: Is it practical to retrofit a data center or will everyone eventually really need to, because they need the speed?

Mr. Raza: Yes. It is very practical to retrofit a data center. In fact, data centers are routinely retrofitted every three to four years. That is because every three to four years the existing traffic density and the amount of traffic coming into the data center overwhelms the switching capability of the data center. However, in the last one and a half to two years, the growth of streaming video and the growth of virtualization and the growth of software-defined data centers have accelerated this trend. Therefore, the retrofitting of existing data centers with more powerful switching capability is now happening every two years and will probably go to one and a half years. To a great degree, the use of optical circuits like you find with the CALIENT switch, enables the ability to make the data center obsolescence-proof for many years. Therefore, it is economically very advantageous because you are extending the useful life of the Ethernet equipment. It also has many advantages in not requiring frequent upgrades, which are otherwise forced on data centers, because of the huge growth in traffic.


CEOCFO: Are you able to “patent protect” the technology or will this eventually become a commodity in some respects?

Mr. Raza: We have a very, very powerful patent portfolio. We feel very strongly that our technology is very well protected by those patents. We are continuing to add patents and we are continuing to innovate. Our patent strategy is both defensive and aggressive. When necessary we have asserted our patents and licensed our patents when it made economic sense. We feel that it would be very difficult for this technology to be commoditized. For instance, right now in almost all instances, we are the only solution that our customers are looking at.


CEOCFO: What is the geographic reach for CALIENT? Are you working with companies worldwide? It is primarily U.S.?

Mr. Raza: Our geographical focus is initially the United States. That is because this is the nexus of this transformation. However, we are seeing two other geographies catching up. One is Western Europe and the other is China. We are seeing China come up very fast behind the United States. Large companies in China have significant data center installations and they are developing the same needs.


CEOCFO: You recently announced a new switch with some new capabilities. What have you added to your product? What will you be adding in the future?

Mr. Raza: First let me describe the new switch that we announced. In the new S320 switch we lowered power dissipation by a factor of three – from 150 Watts to 45 Watts. Therefore, now our switch has the power dissipation of a laptop, which is a dramatic improvement. Its port density is 320 full-duplex ports. It has very well controlled insertion loss. It also has a very small form factor. It is very light, you can even carry it in your arms, and has very low power consumption, as I mentioned. The high port density means it can provide lots of connections and it is also very economically advantageous to use. That is because our cost of goods is very efficient, our manufacturing is also very efficient and scalable and that has resulted in a lot of attention throughout the industry. We have follow-up products that are in development and some that are already being provided to our lead customers. We have not announced them yet, but they will add more capabilities and more efficiency.


CEOCFO: Your website indicates that you have some solutions for the government and intelligence industry. Would you tell me about the connection there?

Mr. Raza: Like the commercial world, it is no secret that the government is also developing its electronic network and its data center infrastructure. Every major government is basically building greater and greater capability of being able to connect computers, so as to analyze and process data. From that point of view, again, we play a very important role in providing the same functions and same benefits to a government data center as we provide to a commercial-scale data center or commercial cloud data center. Government is also moving to cloud. Now, in addition to that, the one thing that is very important is that an optical circuit switch is far more secure than a packet switch in terms of being and susceptible to break-ins. Therefore, it can carry very secure information, so that is an additional benefit that is derived by any organization that wants to focus on the security of its information.


CEOCFO: It appears that there is almost limitless opportunity for CALIENT. How do you as a CEO stay focused? How do you pay attention to what the opportunities should be in the right order and not try everything everywhere because you can?

Mr. Raza: Absolutely! Fundamentally, we have a very focused strategy on the outbound sales side and we are gaining very good momentum. Right now, the company’s greatest focus is to scale its manufacturing and to be able to keep up with the demand. Our demand is extremely strong right now. We are ramping up our ability to meet that demand as rapidly as we possibly can. Fortunately, we are in a relatively unique position. We are also seeking industry support and partnerships. Wider, broader industry support for our product is an ongoing process. However, the most important capability that we are developing is to be able to keep up with the demand in having scalable manufacturing of our rather unique 3D MEMS chips.


CEOCFO: What are the plans for your recent funding?

Mr. Raza: The use of the funds is entirely to scale our manufacturing and to very steadily grow our ability to support our customers and to reach out to new customers.


CEOCFO: Would you explain a little of what is involved with scaling out the manufacturing? What are some of the challenges in getting it right?

Mr. Raza: Fundamentally, our product has many, many layers. We have our own fabrication, so we build our own core semiconductor product that is at the heart of our optical circuit switch. We have our own systems capabilities. Then, finally, we put together our own software package that wraps everything together. That represents a more diverse set of capabilities than is normally required in a system company. That means we need everything from physicists to people who are experts in optics to people who are experts in switching to people who are experts in software, as well as very talented solutions and support people. Therefore, scaling up means adding that diverse set of people, building a product and then having that product extremely well tested, because it is going into a very demanding environment. Therefore, the production has to be flawless. Then it has to scale. That is because this is optical, so there are huge amounts of fiber inside the S320; there are miles and miles of fiber in each box. All of that has to be perfectly stitched together so that every beam of light that travels through that fiber goes from one end to the other flawlessly. That is a very tricky operation and we have been scaling it very rapidly through this year. In the past, as you know, we have only had about four to five million dollars of revenue. This year, in a single quarter, we have more than that. We are multiplying our shipments from quarter to quarter. Therefore, that is the challenge that we are managing as well as we possibly can. That is probably seventy-five percent of the focus of the company. Twenty-five percent of the focus is to build a larger industry coalition to enable our product to be easily integrated into the networks of large corporations. Some of our lead customers are helping with that process and we are making very good progress in that direction also.


CEOCFO: Why should investors and people in the business community pay attention to CALIENT?

Mr. Raza: People should pay attention to CALIENT because CALIENT is a company that has a unique product. Today, it has no competition at all. It is on its way to becoming a crucial building block for cloud data centers. Cloud data centers have an intrinsic momentum. I am not trying to grow that momentum; the entire industry is enabling that momentum. Therefore, what we have is a crucial building block for the data center, which does not really have any competition and which can enable significant economic benefits and significant operational benefits in one of the most important segments of the growing industry. That makes CALIENT a very important company. I carry a heavy burden in making sure that we execute and continue on the path of continuous growth that the business is seeing today. The final proof of the importance of CALIENT is that right now our demand is outstripping our manufacturing scale. That is a very fortunate position to be in and it is also a big challenge for us. That is the challenge that we are working as hard as possible to overcome. As we are able to scale rapidly we will be a very interesting company to watch, where the demand basically is entirely up to us to fulfill, because I do not see an end to it.


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