JDS Uniphase to buy New Jersey
company
$400-million deal aimed at boosting firm's
fibre-optic strength
James Bagnall
The Ottawa Citizen
JDS Uniphase Corp. is shelling out more than $400 million U.S. worth of stock
to acquire Epitaxx Inc., a New Jersey-based manufacturer of advanced optical
components used in telecommunications and cable television networks.
The acquisition -- the company's eighth since early 1997 -- is considered
relatively pricey because revenues at Epitaxx are growing at an annual rate of
only $40 million U.S. On the other hand, the share price of JDS Uniphase
yesterday jumped 8.5 per cent to close at $125 U.S. yesterday on the Nasdaq, up
$9 3é4, giving it a healthy market value of more than $21 billion U.S.
This means the Epitaxx purchase will require JDS Uniphase to dilute its stock by
less than two per cent in exchange for a company that management estimates
will improve JDS Uniphase sales by five per cent annually. Earnings per share are
also expected to rise from the moment the deal closes sometime in November,
said JDS Uniphase chief financial officer Tony Muller.
"Sure, Epitaxx is expensive, but when you've got strong currency like JDS
Uniphase has, then you use it to build market share," said James Kedersha, an
analyst with SG Cowen & Co., "(California-based data networking giant) Cisco
Systems has been using this strategy very successfully for years."
JDS Uniphase chief executive Kevin Kalkhoven said acquiring Epitaxx will
broaden his firm's technology base -- especially in the area of optical receivers
(thus complementing JDS Uniphase's strength in optical transmitters). He also
reckons that Epitaxx will help JDS Uniphase to attack three separate markets,
including long-haul fibre-optic systems, submarine cabling and metropolitan
networks.
Epitaxx, controlled indirectly by Nippon Sheet Glass Co. Ltd., makes technology
that gives operators of fibre-optic networks more flexibility in increasing capacity
and monitoring traffic without having to add physical pipes and optical
amplifiers.
JDS Uniphase has been on an acquisition binge because it's trying to position
itself as the dominant independent supplier of optical components and systems.
There are still a few gaps in its product line, including technology for packaging
certain types of laser pumps. Nortel Networks Corp. is a big producer of such
products for internal use, but it's not clear it would be willing to sell the business
to a merchant (independent) manufacturer such as JDS Uniphase.
The Epitaxx purchase -- which involves the 'active' part of the fibre-optic
business -- will have relatively little impact on JDS Uniphase's Ottawa-area
operations, which concentrate on the 'passive' side of the technology. |
