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MMC inks chip deal for optical networks

Chipmaker MMC Networks signs a deal to build processors for start-up Atmosphere Networks amid a hot market for optical networking equipment.

Chipmaker MMC Networks has signed a deal to build processors for start-up Atmosphere Networks amid a hot market for optical networking equipment.

Atmosphere will use MMC Networks' processors in its optical networking equipment, or high-speed hardware that telecommunications carriers use to update their fiber-optic networks.

As consumers demand more bandwidth to speed the transmission of data across networks, carriers are constantly seeking to upgrade their technology with the latest hardware. In turn, the market for optical equipment is booming, with analysts estimating a $50 billion to $100 billion opportunity for hardware firms.

Chipmakers, such as MMC, Intel, IBM and others, hope to take advantage by selling chips that are used for such optic equipment.

MMC marketing director Lawrence Ebringer said optical networking is the fastest growing market for its chips. Overall, the company sells half its processors for corporate networking equipment and half for Internet equipment, such as those devices that are based on fiber-optic technology.

Terms of the deal were not disclosed.

In the optical market, Ebringer said MMC has struck deals with Ciena and nine other networking firms, including several large, established players. He declined to name the other companies, as their products haven't yet shipped.

"This is a hugely growing market," he said.

Optical technology takes a strand of fiber-optic "glass" and allows the microscopic link to deliver large chunks of voice and data.

The stocks at networking start-ups specializing in optics, such as Redback Networks and Sycamore Networks, have skyrocketed. Other firms have been the target of takeovers that involve huge premiums. For example, Cisco in August bought Cerent for $7 billion, while Redback Networks this week paid $4.5 billion for Siara Systems.