Tuesday July 20 6:41 PM ET
JDS Uniphase Rumored To Be Eying Nortel Unit
By Susan Taylor
OTTAWA (Reuters) - Just weeks after completing the merger that took it to the technology big leagues, JDS Uniphase Corp. (Nasdaq:JDSU - news) is rumored to be eyeing the acquisition of the fiber-optic division of Nortel Networks Inc.
JDS Uniphase, which develops gear to help boost the capacity and performance of fiber-optic networks, has made no secret it is considering acquisitions to expand its manufacturing capacity.
The firm, a product of the June 30 merger of San Jose, Calif.-based Uniphase Corp. and Ottawa-area firm JDS FITEL Inc., is preparing to pad its war chest by selling 10 million common shares. That will boost an already healthy cash balance of $230 million to more than $800 million.
''The million-dollar question is why are they raising the money,'' said Bruce Krugel, analyst at Kearns Capital Ltd. in Toronto. ''Obviously they must have their eye on something specifically.''
Nortel's opto-electronics components division in Paignton, England, would make a good buy, said several analysts who follow the firm.
''It would make a lot of sense for both sides,'' said Patrick Houghton, analyst at Sutro & Co. in Los Angeles.
''I think the desire would be there on the JDS Uniphase side. I think the big question is ... would Nortel be willing to give that business up?''
Spokesmen for both JDS Uniphase and Nortel said they would not comment on market speculation.
''The rumor is out there and a lot of people are trading based on what they think this means,'' said an analyst who asked not to be named.
Such a deal could be worth anywhere from $500 million to $1 billion, analysts estimate.
The two firms are no strangers. In late January, Uniphase extended a supply deal for high-power laser chips with Nortel for three years, worth about $10 million annually for Uniphase.
An acquisition would ensure market dominance for JDS Uniphase and expand its active components line, technology that helps push large volumes of data along fiber-optic networks.
The Nortel division would also deliver packaging capability. While JDS Uniphase produces laser chips, it does not supply the devices housing them -- a significant source of revenue.
''Uniphase has not made it a secret that they plan to get into the packaging business and a good way for that is to acquire someone,'' Houghton said.
The purchase would also supply JDS Uniphase with a plant already in production -- shaving months from any internal efforts to expand capacity to meet an explosive demand for products.
Nortel Chief Executive John Roth has been steering his firm's focus to its core network technology, paring away extraneous lines of business such as manufacturing operations, with plans to sell off at least 10 plants worldwide. Nortel bought the fiber-optics division from Britain's STC in 1991.
But some analysts question whether Nortel would sell one of its fastest growing and highest profit units and if JDS Uniphase could afford the ticket price.
''I can't see how they can do it financially,'' said an analyst who asked not to be named. ''They'd have to be buying a piece of it because they don't have enough money to buy the whole thing.''
JDS Uniphase is more likely in talks with Waltham, Mass.-based Oak Industries Inc. to buy its Lastertron Inc. division, the analyst suggested.
Another analyst suggested that a recent show of interest in JDS Uniphase stock is more likely tied to corporate presentations for its equity issue rather than takeover rumors.
JDS shares closed at C$251 on the Toronto Stock Exchange Tuesday, down C$9.15 as technology issues took a beating. On the U.S. Nasdaq the stock ended at $168.31, down |
