Uhh, back on track folks! Thought we were discussing JDSU on this thread.
Here's some food for thought, lifted from Raging Bull board.
U.S. giants target Nortel, JDS...
Today's market leaders don't dare become
complacent in the face of giant U.S.
competitors, Bert Hill writes.
Bert Hill
The Ottawa Citizen; with files from Bloomberg News
Nortel Networks and JDS Uniphase are leaders in the booming fibre-optic
market but they have no reasons for complacency. A new charge of the light
brigade is rapidly forming.
Competitors such as Lucent Technologies, Corning and Cisco Systems are
putting together deals and plans worth $9 billion U.S. in a bid to close the
gap that Nortel enjoys in systems and JDS has in components.
Lucent Technologies chief executive Richard McGinn said yesterday his
company will announce new faster products next week in a bid to regain the
No. 1 spot in fibre-optic equipment from Nortel.
"It's our job to go out there and retake the hill," he said after Lucent's annual
meeting in Oakland, California. "We are committed to regaining that
momentum."
Nortel announced this week it will spend another $260 million more to add
3,400 jobs in Ottawa, Montreal and the U.K. to boost production of optical
systems and components. It had previous announced plans for a
$400-million expansion. It spent $3.25 billion in stock in December to buy
Qtera Corp. to get control of technology that dramatically increases fibre
amplification.
And JDS plans to triple output at operations around the world in the next
two years with more than $20 billion in deals and expansions.
Industry-wide sales of fibre-optic components will swell to $21.3 billion in
2003 from $5.1 billion last year, according to RHK Inc.
Lucent announced this week that it will spend $30 million to hire at least 500
people and quadruple production of parts used in fibre-optic gear from two
plants in Pennsylvania.
Lucent stumbled badly year when it discovered it lacked the capacity to
meet demand for fibre-optic gear.
Last week, the Murray Hill, New Jersey-based company bought Ortel
Corp. for $2.95 billion to add parts that speed traffic on the optical leg of
cable-TV networks.
Corning of Corning, New York, will buy NetOptix Corp. for about $2.14
billion in stock to gain filters that speed fibre-optic systems.
It's target is JDS Uniphase of Nepean and San Jose, which now controls
about 60 per cent of the independent production of fibre-optic components
and modules.
Corning, which primarily makes the glass fibre for optical networks, wants a
bigger slice of the market for parts that help increase capacity.
The demand for fibre is rising by 20 per cent a year, while demand for
components is more than doubling, boosting Corning rivals such as JDS
Uniphase .
"It's not fibre people are going to be replacing, it's the optronics, all the stuff
that goes on the fibre that lights it up," said analyst Sanjay Mewada of the
Yankee Group.
Corning also unveiled a venture with Samsung Electronics that it says will
make fibre-optic components faster and more cheaply in a Korean facility
owned by Samsung. In addition, Corning agreed to buy a fibre-optics
research lab from British Telecommunications Plc for $66 million. NetOptix
has 140 employees and had $14.4 million in sales in the year ended Sept.
30. Corning had sales of $4.3 billion in 1999.
Corning is following the lead of JDS Uniphase, which spent $20 billion in the
last eight months on six acquisitions.
The biggest last month, for E-Tek Dynamics of San Jose for $15.5 billion,
gave JDS a commanding lead in the technology that increases traffic on fibre
by splitting light waves into as many as streams.
NetOptix and Corning are expanding into this technology, called dense
wavelength division multiplexing, or DWDM.
The technology is cheaper for phone companies than adding more lines.
"There are very few companies that make filters, so to have that operation
in-house is essential," said analyst Robert Tango of SunTrust Equitable
Securities in Boston. He rates Corning shares a "strong buy."
This month, Corning completed the $1.4-billion purchase of Siemens AG's
fibre-optic cable and parts businesses to expand in Europe and Asia.
And last month, it purchased Oak Industries Inc., a maker of lasers used in
optical amplifiers, which boost the strength of light signals travelling through
fibre-optic lines.
Corning is trying to double its 10 -per-cent share of the DWDM market. It's
hoping to take advantage of JDS Uniphase's acquisition of E-Tek.
"Before JDS Uniphase and E-Tek merged, a lot of people were using those
guys as No. 1 and No. 2 sources," said analyst Charles Willhoit of JP
Morgan Securities, who rates Corning shares a "buy."
"People look over and say, 'Hey Corning, you can be a second source.' In
the past four weeks, their phones have been ringing off the hook."
Gerald Fine, vice president and general manager of Corning's photonic
technologies division, said NetOptix will have about $50 million in sales in
2000, and more than double that next year.
Corning said the joint venture with Samsung, Samsung Corning
Micro-Optics, will use robots to make fibre-optic components at a Samsung
plant near Seoul, in Suwon, South Korea. The plant's products will include
filters now made by a NetOptix unit. Financial terms weren't disclosed.
British Telecom's photonics technology research center in the U.K. employs
about 40 scientists and has hundreds of patents that will be used to develop
new products.
Cisco Systems Inc., the world's largest maker of computer networking
equipment, said this week it will pay $100 million for stakes in two new
optical units of Pirelli SpA, Italy's largest tire and cables group.
Cisco gets a 10-per-cent stake in an optical components unit and an
undersea optical transmission unit.
The investment was part of a deal in December that saw Cisco buy into the
fibre-optic components business for the first time.
Previously, Cisco had indicated it would contract for the technology it
needed to break into the market. It bought Pirelli's optical systems unit for
$2.15 billion in stock. |
