Article from Ottawa Citizen about JDSU:
Wednesday 5 April 2000
JDS buys Cronos for $750M
Bert Hill
The Ottawa Citizen
JDS Uniphase Corp. bought new mirror-based technology yesterday that could drive the next generation of huge telecommunication switches.
The $750-million U.S. stock deal for Cronos Integrated Microsystems Inc. of North Carolina is a modest piece of JDS's $24-billion shopping spree for new technology in the past year.
But the addition of the Cronos technology puts JDS into the race to develop all-optical switching technology that will meet the needs of telephone companies swamped by Internet traffic.
JDS, based in Nepean and San Jose, California, also revealed that U.S. regulators are seeking more information regarding its $15.8-billion deal for E-Tek Dynamics. The company said the regulators have not raised the question of JDS having to sell off some assets to allow the deal to proceed.
JDS said it still expects the E-Tek deal to go through in the next three months. The Cronos takeover will not require regulatory approval.
Analysts praised the JDS deal for Cronos. Michael Urlocker of Scotia Capital had downgraded his recommendation on JDS from "buy" to "hold" last week partly on grounds that the company had failed to take a strong position in the emerging technology. "I think this is the most exciting acquisition we have seen from JDS."
JDS chief executive Kevin Kalkhoven said major telephone companies are pushing for "mega-switches" that have 25 times the capacity of present products.
JDS president Jozef Straus predicted the company will start putting the new technology into several products within a few months and produce a new generation of switching products in 18 months.
The mirror technology, officially called MEMS (Micro-Electro-Mechanical Systems), is one emerging answer to the biggest challenges facing fibre-optic technology: The fat pipe isn't very bright. Fibre-optics moves large volumes of telecommunication traffic on streams of lights quicker and cheaper than copper wires or satellites. But it can't regenerate weak signals or switch traffic without expensive and bulky electronic conversions.
The new technology, based on tiny mirrors pivoting in three dimensions, bounces and manages the beams of light cheaply and efficiently.
Mr. Kalkhoven said a MEMS switch with 256 tiny three-dimensional mirrors occupies less than a square inch of space. Mr. Straus said that big switches based on conventional technology could cover a table top.
The technology has attracted the interest of several big players including Nortel Networks, which bought Xros Inc. for $3.25 billion in stock last month, and Lucent Technologies, which has promised to deliver a switch this fall.
Agilent Technologies Inc., a company being spun off from Hewlett-Packard Co., and closely held Optical Micro-Machines Inc. of San Diego are developing switches of their own.
The mirror system has also attracted rival technologies based on liquid crystal, championed by Corning Inc., and balloon-jet technology, led by Agilent and others. Mr. Kalkhoven said that JDS believes the mirror technology is the best approach.
Cronos, founded in 1992 at the Microelectronics Centre of North Carolina, has 67 employees and annual sales of $10 million U.S.
It does most of its work developing prototype equipment on silicon. Mr. Brattner said some customers for Cronos technology are now releasing big new router gear which drive traffic on the Internet.
Though he would not disclose the names, Cisco Systems and Juniper Networks, which dominate the field, have just released such equipment.
Mr. Brattner said the company plans to expand capacity by 500 per cent in the next few months to keep up with demand.
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