https://www.linkedin.com/posts/mark-lutkowitz-b22abb2_a-revenues-based-lifeline-urgently-needed-activity-7132116404488564736-fpiU?utm_source=share&utm_medium=member_desktop

A revenues-based lifeline urgently needed by Lumentum (please see: https://lnkd.in/evnS6jhD) was apparently thrown by Google (please see: https://lnkd.in/ec3Z5QHK). Shortly before the announcement by the manufacturer of its latest acquisition, fibeReality had discussed the importance of the association between the “third” optical transceiver supplier to large users, including the Google/Cloud Light partnership (please see: https://lnkd.in/e4DkNwnK). It would be almost impossible to believe that Lumentum would have purchased Cloud Light without Google’s approval/encouragement. Certainly, the cloud services provider will now have the benefit of the US-based “sticker.” (There is evidently a game being played involving many companies in all types of businesses across the world in which appearance is more important than where devices are produced, etc.) We also learned prior to the original news release that Lumentum’s team in Ottawa was working on a large project involving optical circuit switching with the primary focus in meeting Google’s requirements. Overall, the vendor seems to have become more of an “in-house” optics gear contributor to the customer.

The downside for Lumentum is that with the rescue of its top line, Google will justifiably have tremendous negotiating leverage. There will always be the understanding that the former had decided to abandon the transceiver space earlier, and now it is being put in control of a firm that had been groomed through Google’s own investment to meet its specific needs, along with presumed ties on intellectual property. Also, the pressure for the user to respond on solution differentiation has never been greater in the high-stakes, AI market, and that burden should be expected to be directly transferred to the supplier. Furthermore, Google knows that Lumentum will be greatly dependent on the buyer with its new focus on the Cloud & Networking segment (https://lnkd.in/eMaMprGi).