Vitesse | Andrew@Nyquist | Comm Semi Markets

I finally got around to reading Andrew’s review of VTSS’s 1Q07 call. I’ve always admired Vitesse for their ability to survive. Somehow they came out of the super-computer mess in the early ’90’s, but their current woes seem worse.

I’m a markets & positioning guy, and the first thing that leaps out at me is that VTSS is mostly in what I call the “middle”, and the “middle” is not good. To survive in comm semi, or semi at all, requires exposure to Data Center Equipment for hosting/serving applications ( ie Storage Computing ), Broadband Access Technologies ( xDSL, PON ), Wireless Access Technologies ( air-i/f or wireline back-haul), or consumer appliances. The rest is a “hell zone” 👿

I developed a simple model for visualizing the good Internet markets (Thinking About Network Diagrams.) The simple way to pick good Comms markets today is …. stay at the outer-most points of the Internet stack. The middle is dead.

comms_markets-20070322.gif

The middle is dead because it has been very successful in providing for the proliferation of Applications ( ie Google, AMZN, Skype, etc) and Consumer Appliances (PC, iPod, etc). The IP Network provides an amazing Application platform, and we are only in the beginnings of an Internet Application bonanza. For applications and appliances to grow further, they don’t want the middle to change (they’ll work around its problems in the datacenter or appliance). I’m speculating that this is a key point behind Cisco’s recent acquisitions in the Application Layer.

And yes 😈 I purposely drew the Internet to like a giant LAN, PC, or any electronic device… to irritate & motivate. Each block is “fractal”, they are all fundamentally the same. So there are good & bad bits in each block. I’ll get to this later.

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6 Responses to Vitesse | Andrew@Nyquist | Comm Semi Markets

  1. Things are much better today than they were 6 months ago at Vitesse.

    Just because the middle doesn’t change doesn’t mean it is a bad business. You just need the right economy of scale to succeed.

  2. Iain Verigin says:

    * wrt/ to middle
    – I’ve got lots of fleshing out of this diagram to do
    – as I quickly noted in closing — each block is fractal. so there are juicy bits in each block
    – I believe the middle will become more “fibrous” and thus less interesting to Semi’s. ( unless they can integrate optics … )
    * Overall — My key point ( which I should have made ) is “A vibrant Ecosystem requires an “Hour Glass Figure” or Revenue and Profits
    – the last bubble burst because the Top didn’t make enough money to support the Ecosystem.
    – This time around the Top is doing well and I think it will pull many new networking technologies over the hump from “test” to mainstream.

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