Interview With The President: Orckit Communications Ltd. (ORCT) - Izhak Tamir
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Izhak Tamir has been President and a Director of Orckit Communications Ltd. since its founding in 1990, and he has been Chairman of the board since July 2008. In addition, Mr. Tamir has served as Tickro's Chairman of the board since January 2000, and he was the company's Chief Executive Officer from August 2003 until December 2007. He has been Chairman of the board of Corrigent Systems since 2001 and Chief Executive Officer of Corrigent since May 2007. Mr. Tamir also served as a Director at Gilat Satellite Networks since 2005. From 1987 to 1989, he was employed by Comstream Inc., in San Diego, Calif. From 1985 until 1987, he was Vice President of A.T. Communication Channels Ltd., a subsidiary of Bezeq The Israel Telecommunications Corporation Ltd. From 1978 to 1985, Mr. Tamir was a Senior Engineer in the Israeli government.
TWST: Please tell us about Orckit.
Mr. Tamir: I founded the company with a partner, Eric Paneth, 20 years ago. Our initial business was DSL; we were a pioneer in DSL. In the year 1999 and 2000, we had the second biggest ADSL market share in the world. Our main customers were Verizon, Deutsche Telekom, Telia in Sweden. In the year 2000, we realized that DSL is a very low-margin business and we may not survive financially in this market. So we exited the market and put the company into a new direction, a direction that we are in now - Carrier Ethernet + Transport. We started with a product that combined TDM and Ethernet functionality in the same platform. We came with the first product in 2004.
Our early adopter was KDDI, the second largest service provider in Japan that has 30 million subscribers. KDDI rolled out our product all over Japan, migrating from their legacy NG-SDH platform to future-proof, packet-based Carrier Ethernet + Transport products. By the year 2008, they have rolled out over 2,300 gears delivering residential triple play, Ethernet business services and 3G mobile backhaul traffic. So far revenues from KDDI crossed $200 million, a major success. Actually most of the Metro network of KDDI is built with our equipment. In 2006 we started with the next-generation product in this area. Despite the fact that KDDI was an early adopter, the market is late to develop and we start to see the initial signs of ramp-up now. Nine years or actually 10 years after we started the product development, we see emergence of this market. Our main target market is SDH/NG-SDH replacement. This is a summary in a nutshell.
TWST: What does the competitive arena look like?
Mr. Tamir: Our market is a portion - a slice of the carrier Ethernet market. The carrier Ethernet market is about $2 billion market a year. We are focusing on places where you need TDM and Ethernet in the same platform. We believe that our competitive edge is a breakthrough technology in a very low price point, both from a cap ex and op ex point of view.
TWST: What were Orckit's goals 12-18 months ago, and how have you performed in that time frame?
Mr. Tamir: In November of 2008, we realized that the world was in a financial crisis and we envisioned that customers will pay extra attention for reducing cap ex and op ex. So we divert our resources to develop a state-of-the-art small footprint, low-power-consumption product in a very low price point. The main to-do list was to first, accelerate development of this product to be able to offer our customers with a fully functional, MPLS-based Carrier Ethernet + Transport switch in a very aggressive price point, which is also capable to deliver mix of Ethernet and TDM services, eliminating the need to maintain two separate networks - one for legacy TDM, SDH, and one for packet carrier Ethernet.
Second, heavily invest on interoperability with other vendors' product. The purpose was to enable the customer to enjoy our solution without replacing the whole network. In other words, when we come to a customer, we don't tell him, "Look how nice a solution we have, but you have to spend $60 million." We come and say, "Look what a nice solution we have, you can start with $200,000 or $0.5 million. Don't replace anything, just put our equipment in interoperable mode with your current Metro equipment. As times goes on, you can buy our bigger boxes and get the full benefit of our solution."
The third item on the to-do list was to create a global sales force because changing the strategy is not only changing the product, it includes also the change of selling force, administration support and more. Before November 2008, a potential target for customers was a $30 million-each customer; KDDI was $200 million. Then you can focus on few customers with a very slim sales forces and you're okay. Once you start to talk about a few-hundred-thousand-bill customer, it's a completely different organization, different support and different sales challenge. So the third item on the to-do list was to open offices around the world, which we did. We have now offices in Thailand, India, Philippines, Russia, Germany, U.S., Korea, Japan, Brazil and Mexico. So these were the three key items on the to-do list that were accomplished successfully.
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