JDSU--Europe’s optical networkers in focus
By Gareth Vaughan, FTMarketWatch 5:46:00 PM BST Jul 10, 2000
LONDON (FTMW) - European optical networking companies such as Bookham Technology and Highwave Optical were under the spotlight on Monday after industry giant JDS Uniphase said it was buying SDL in a $41 billion deal.
Bookham [UK:BHM] surged 10.4 percent to 46.60 pounds on expectations that JDS’ and SDL’s big U.S. competitors may scramble to catch up by buying out European players in the sector.
SDL [SDLI] makes laser equipment that lets customers send multiple light signals over a single fiber. JDS [JDSU] is one of its biggest customers.
Under the terms of the deal, SDL shareholders will get 3.8 JDS shares for each SDL share, or about $441.51. That represents a premium of almost 50 percent over SDL’s Friday closing price. See full story.
“Anything that’s optical right now is really hot,” said Olivier Vallee, Paris-based optical networking analyst at Close Brothers.
He said the price JDS is paying is about 100 times SDL sales, while shares in Germany’s ADVA Optical Networking [DE:510300] trade at about 55 times its sales.
“Optical networking represents the single biggest challenge for telecoms service providers over the next few years. Everyone’s trying to get into it,” Vallee said.
Europe’s players
European optical networking companies include the U.K.’s Bookham Technology [UK:BHM] and IQE [UK:IQE], France’s Highwave Optical [FR:416100] and ADVA.
Following the massive JDS-SDL deal, shares in most of the European players have gained. Over in Paris, Highwave leapt 21.1 percent to 91.25 euros and ADVA surged 7.6 percent to 726 euros in Frankfurt.
IQE rose 1 percent to 52 pounds.
Close Brothers’ Vallee said of Europe’s publicly listed optical networking companies, he doesn’t see any acquisition targets, but that start ups with products, such as Highwave which listed in Paris last month, might emerge and become takeover targets for the big players.
“The number of acquisition targets is running out,” he added.
Of the listed batch Vallee said Bookham and IQE in particular, are in great positions because they make Dense Wave Division Multiplexing (DWDN) lasers on silicon. “Bookham’s advantage is it’s the only company I know that does it on silicon,” he said.
Lucent, Nortel and Corning may prowl
Scottish Equitable’s technology fund manager Stuart O’Gorman said the deal would create a dominant force in the high capacity optical networking equipment sector.
__ “The optical area is hot and this goes to show just how hot,” O’Gorman said.
This meant JDS and SDL’s remaining competitors, including Corning [GLW] and the in-house divisions of Lucent [LU] and Nortel [NT], were likely to hunt around for acquisition targets in the high capacity area like Bookham, O’Gorman said.
“The optical area is hot and this goes to show just how hot,” O’Gorman told FTMarketWatch.
Scottish Equitable, which has a fund worth over 270 million pounds that invests in technology stocks world-wide, had 3 percent of its investments in SDL and also invests in Bookham.
He said the price being paid for SDL was high but fair, as long as authorities approved it.
“The price is high, but if it’s allowed to happen, then you’ve got a monopoly in an area that’s growing at 100 percent a year, and that’s worth rather a lot of money,” he sad.
Gareth Vaughan is a reporter in London for FTMarketWatch. |
