JDS Uniphase to Buy Epitaxx for $400 Mln in Stock (Update4)
San Jose, California, Oct. 4 (Bloomberg) -- JDS Uniphase Corp. agreed to buy Epitaxx Inc. for $400 million in stock, as the No. 1 maker of fiber-optic equipment parts aims to supply more of the components used in phone and cable-TV networks.
Epitaxx makes products that detect and receive the laser pulses that carry information on glass fibers. JDS Uniphase supplies the lasers to equipment makers including Lucent Technologies Inc. and Nortel Networks Corp.
The purchase gives JDS Uniphase a bigger share of the market for optical components, where sales are rising by more than 40 percent a year. It's the first acquisition by the company since Uniphase Corp. bought JDS Fitel Inc. for $7 billion in July. ``Epitaxx will prove a good fit,' said Kevin Slocum, a SoundView Technology Group analyst who rates the stock a ``buy.' ``Receivers were a missing piece of the puzzle.'
The acquisition, which needs U.S. government and regulatory approval, will add to earnings per share by a ``low single- digit' percentage, JDS Uniphase Chief Financial Officer Tony Muller said. It will be accounted for by the purchase method.
Epitaxx, based in Trenton, New Jersey, is majority-owned by a unit of Nippon Sheet Glass Co. The Japanese glassmaker planned as recently as last year to spin off the company in an initial public offering.
Shares of San Jose, California-based JDS Uniphase rose 9 3/4 to a record close of 125. The stock has more than tripled this year.
Both Ends
JDS Uniphase will now supply parts for both ends of fiber networks. In the receiver business, it will compete most directly with Fujitsu Ltd. and internal divisions of fiber-optic equipment makers such as Lucent. ``We believe this is yet another step to being the dominant supplier of componentry to the optical industry,' JDS Uniphase Chief Executive Kevin Kalkhoven told investors and analysts in a conference call.
With the receivers, JDS Uniphase gains parts used to read the laser pulses and convert the optical signals into electronic data. The parts, called photo diodes, are important because they're increasingly used elsewhere in fiber networks, said Jim Jungjohann, an analyst at CIBC World Markets.
As phone-equipment makers add wavelengths of light to boost the capacity of fiber networks, they're expanding the use of photo diodes. The devices can regulate the light emitted from lasers, making it easier for network operators to control the flow of information. ``Eventually, photo diodes will be needed in all pieces of the network,' Jungjohann said.
JDS Uniphase will be able to combine the diodes with its other components to build new products it calls modules. Since it agreed in January to acquire JDS Fitel, the company has said it expects to increase profit margins and boost sales by producing modules in addition to components.
Muller said Epitaxx is on track for more than $40 million in sales this fiscal year, which ends in March. It had less than $30 million last year, he said.
Epitaxx customers include phone-equipment makers Alcatel SA and Ciena Corp., as well as Harmonic Inc., which builds equipment for cable-TV networks. |
