Baba, We appear to have a difference in understanding of where POET is today with the optical interposer platform versus where they were with the GaAs platform. I believe your opinion is for the most part driven by the general market response. The companies I spoke of the other day continue to hit new 52 week lows. POET is not.

I am sure you are correct in your assumption regarding agreements in place that would prevent a hostile takeover with the companies they are dealing with directly. 

The one thing to consider is that once companies decide they need to begin using POETs platform it will occur in stages. The suppliers that begin to  be displaced will need to  fight back by reducing their cost initially but their longer term solution would be to attempt to  duplicate the optical interposer or potentially fast track their effort and buy or merge with POET the company that produces them. And I suspect that the companies working directly with POET will have some level of communications (under the table) with their long term suppliers (who they play golf with and receive gifts from…box seats etc.) that there is a new platform that will take market share so be ready for it.

Andec provided this reference from POET management that is worth reviewing:

• TAM or Total Available Market is the total market demand for a product or service.  So for example - the total market for all CWDM 100G Datacenter products over the next 4 years is $4.5B.  This total transceiver market size is however not accessible to POET - since the total market for transceivers includes all the electronics, housings, modules, and of course the optics.  Since POET's solutions are in particular related to the Optical Engine - its access is a smaller portion of this total market.
• SAM or Serviceable Available Market is the segment of the TAM targeted by our products and services which is within our geographical and technical reach.  Here, we actually look at the market size that is "serviceable" by our products.  So we look at the opportunity available to us - where our particular solution could play.  Here, we restrict the total opportunity to only the opportunity associated with optical engines.  So the SAM for a single customer is the total opportunity available to us at a single customer - based on the customer's disclosure to us relative to the size of their business for that particular application(s) versus time.  This would include the total opportunity where POET's optical engines could have an impact and an intersect point with the customers product line.  The description of the SAM is the description of the opportunity - assuming POET actually builds every one of the optical engines for all targeted applications, they all get qualified and then POET gets 100% of the share of this particular customer.  This is what SAM stands for.  It is the total serviceable opportunity.

• SOM or Serviceable Obtainable Market is the portion of SAM that you can capture.  Now - SOM is that fraction of the SAM that can be "obtained".  For example - lets say that the SAM at a customer included optical engines for 100G CWDM and 10G PON.  SAM includes the total POET opportunity for these two applications - 100% share. 

However - if our development plan first only produces a 100G CWDM, then the "OBTAINABLE" portion of the SAM is smaller.  Further - POET will not immediately garner a 100% market share at any customer no matter how competitive we are.  The first thing many customers will do is to take our pricing to their existing suppliers and have them match it.  I am sure you do it when you are shopping.  That is why - having a source of architectural cost disruption is important.  We expect our share to grow over time - once we are proven to be a reliable supplier and have the demonstrated ability to scale our supply to the industry demand.

• REVENUE -  this is then the fraction of the SOM that is realized into sales.  This ratio should ideally be 100%, but it can be lower depending on a number of factors that can be tied to supply, logistics, pricing, discounts, timing of orders/delivery,  etc..etc..

to be realistic the SOM needs to factor in:

• our product: people will want to buy your goods -- CHECK
• our marketing plan and the identified distribution channels: you have a clear plan to reach a large portion of your target customers -- CHECK
• your SAM and the strength of your competition: chances are that you are not going to take 50% market share within 6 months. Therefore your SOM needs to be a reasonable fraction of your Serviceable Available Market

Now back to the first point you were making.  The SAM presented is correct and represents the total opportunity for TROE (transmit and receive optical engines) across multiple applications at a single customer.

If for example, the only thing you have is a "receive optical engine" - obviously that is a fraction of the SAM.  The revenue guidance is a fraction of the SOM - recognizing that we are not yet sampling complete TROE and the qualification time period is NON-ZERO. We have gone to great lengths to discuss the qualification period - it can take anywhere from 6-12 months depending on the application. And thereafter - it will be a ramp - not a step.  

Furthermore, it is important to point out that we have NEVER provided hard revenue guidance recently.  It was always either revenue potential (which is another way of stating the SAM) or SAM ... that is what is the potential or SAM.  

I hope this can be clarified.  We as management want to be candid - but our attempts at transparency are often misinterpreted and then expectations are set based on these misinterpretations."

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