Shares of chip maker Centillium Communications Inc.(Nasdaq: CTLM - message board) jumped more than 15 percent today on word that the company has won some sizable EPON business in Japan.

    Centillium didn't name any names in announcing the news today. (See Centillium Wins FTTP Deal.) But it's been widely known that the company has been chasing EPON business at Japanese giant NTT Communications Corp. (NYSE: NTT - message board).

    Centillium teamed up in 2005 with OF Networks Co. Ltd., a joint venture of Oki Electric Industry Co. Ltd. and Fujikura Ltd. Reportedly, their goal was to target NTT's upcoming buildout of GE-PON (the preferred Japanese term for Gigabit EPON). (See Centillium Targets GEPON and Oki, Fujikura to Create JV.)

    Analyst Tim Kell is of Stanford Financial Group believes Centillium's win is, indeed, the NTT project, with OF as the equipment supplier. Centillium officials declined to comment.

    Centillium shares were up $0.19 (12.50%) to $1.71 in Tuesday trading.

    The deal suggests that Centillium, which started its PON efforts in 2004, can hold its own against competitors like PMC-Sierra Inc. (Nasdaq: PMCS - message board) and Teknovus Inc.

    "This validates that Centillium's got a working platform," Kellis says.

    Centillium's win is a "multimillion dollar" order for a processor called Mustang, which will be used in optical network units (ONUs). The ONU is the less complex side of a PON connection, sitting at the customer premises. Its counterpart, the optical line terminal (OLT), sits in the central office. The OLT is a higher-end box than the ONU, but a carrier needs a lot more ONUs.

    The key to the Centillium/OF partnership has been the integration of video into the ONU, Kellis says. Until now, NTT has carried video on an overlay wavelength, a situation the carrier wanted to change with the next generation of technology.

    Centillium expects to deliver the chips during the next six months, which implies two quarters of revenues.

    Even a minimal "multimillion dollar" order during that time could spruce up Centillium's financials, Kellis points out. The company's revenues for the past 12 months totaled $46.6 million, averaging $11.65 million per quarter. So, a $1 million boost per quarter could produce growth in the neighborhood of 10 percent.

    Centillium continues to lose money, however. Net losses for the quarter ended June 30 were $8.9 million, or 22 cents per share, on revenues of $10 million. (See Centillium Reports Q2.) "Their DSL revenues in Japan are being impacted, ironically, by the PON buildout," Kellis says.