FEBRUARY 22, 2000

By Peter Heywood

a company aiming to be "the Intel of optical integrated circuits" -- are hoping to

see its share price shoot skyward in the next few weeks. They say

breakthroughs are imminent that could lead to Lumenon being the next optical

component vendor to see its market cap soar to many billions of dollars.

On the marketing front, Lumenon is planning to demonstrate rapid progress

toward developing a low-cost way of manufacturing optical integrated circuits at

Specifically, it will show some DWDM (dense wave division multiplexing) chips

made with its "Phasic Hybrid Sol-Gel Glass" technology. In this process, silicon

substrate is coated with a polymer and then circuitry is imprinted on it by placing

it under a mask and blasting it with ultraviolet light.

The DWDM chips that Lumenon will be showing will enable equipment vendors to

pack a lot of wavelengths into a single fiber, because they support a spacing

between wavelengths of 50 Gigahertz (Ghz), according to Reginald Ross, the

company's vice president of corporate development.

Although that sort of wavelength spacing is state of the art for DWDM, Lumenon

is demonstrating the chips at OFC for another reason --to underscore how quickly

manufacturing facilities can be built when using its technology. The one-year-old

company is spending about $20 million building a plant that is expected to make

500 optical devices a day when it goes into production next year. In comparison,

semiconductor foundries have much higher capacity, but they take two or three

years to build and require an investment of $1-2 billion, according to Ross.

Moreover, semiconductor foundries need thousands of skilled workers, while

Lumenon's factory has 250, the majority of whom are semi-skilled.

Ross says Lumenon's production process also results in very short development

cycles. "It's a matter of days between getting a new design and having the silicon

product in our hands," he says.

On the financial front, Lumenon appears close to solving some problems that

have kept its share price in the doldrums since last December. It had risen

rapidly from 25 cents to $42 in a matter of 11 months, but then it bumped down

to between $20 and $25, where it's oscillated ever since.

The fundamental problem was that regulations covering trading on NASDAQ's

Over The Counter Bulletin Board (OTC BB) were tightened up and Lumenon,

along with a lot of other companies listed on the Board, had to register new

documents with the Securities Exchange Commission. Getting approval of these

documents has been a long winded process, partly because the SEC has been

swamped with work and partly because Lumenon's massive increase in market

capitalization led to the SEC going over its documents with a fine tooth comb.

While this has been sorted out, Lumenon's listing on the OTC BB has been

suspended and the only way of trading shares has been via the unauthorized

"pink sheet" market. As a result, it discouraged a lot of reputable investors.

Further, Lumenon's stock price has been buffeted by rumor mongering among

Lumenon has filed the latest revision to its documents to the SEC last Friday

(Feb 18) and thinks it's close to getting approval. "We're working with the SEC to

tidy up the last details," says Ross. Once it gets approval, trading will

recommence on the OTC BB within a few days. Lumonen plans to apply for a

listing on NASDAQ's main board as soon as this takes place.