Nortel, JDS Uniphase in Talks to Ease SDL Purchase
By Erik Schatzker
Brampton, Ontario, Aug. 17 (Bloomberg) -- Nortel Networks Corp. and JDS Uniphase Corp. are in talks on a multiyear supply agreement that would ease Nortel's concerns over JDS's proposed acquisition of SDL Inc. for $42.3 billion in stock.
The agreement would guarantee Nortel a supply of fiber-optic components from JDS Uniphase, the biggest maker of such products, for several years. Nortel, the biggest maker of fiber-optic equipment, was JDS's No. 2 customer last fiscal year, accounting for 15 percent of its $1.43 billion in sales.
``We are exploring a range of options with JDS that would enable us to address the explosive demand for our optical systems and concerns relating to the proposed merger with SDL,'' Nortel spokesman Jeff Ferry said. ``Our biggest concern is maintaining supply.''
Nortel expects its sales of fiber-optic equipment to exceed $10 billion this year and needs to ensure it has enough components to make those products and to boost production in the future. If JDS acquires SDL, Nortel won't be able to buy components from one when the other runs out.
SDL's main products are lasers used to amplify signals on fiber-optic networks. It also makes components that boost the capacity of those networks.
Last month, Nortel and Corning Inc. discussed combining their component businesses to form a new company bigger than JDS. They called off talks over disagreements on how to value Nortel's unit and whether the combination would hurt Corning's sales by making it less independent.
Terms Undecided
While JDS Uniphase and Nortel have been talking since San Jose, California-based JDS unveiled the acquisition on July 10, the discussions are early and terms are undecided, Ferry said.
JDS wants to buy rival SDL to further distance itself from Lucent Technologies Inc. and Corning as the dominant maker of parts used to send information on beams of light. JDS expects the acquisition will get close scrutiny from U.S. antitrust regulators, who typically poll customers to check for concerns.
By gaining support from Nortel, JDS would clear a potential hurdle to its purchase. Nortel Chief Executive John Roth has said he's concerned about the impact the purchase of SDL could have on his business, since JDS would get even greater control over the supply of some key lasers and other components.
JDS Chief Financial Officer Tony Muller declined to comment on negotiations with customers.
``We want to do anything we can to satisfy their needs,'' he said of Nortel.
Shares of JDS rose 13/16 to 120 1/4 today. Nortel, based in Brampton, Ontario, rose 1/2 to 81 1/2, while SDL, based in San Jose, gained 7 3/4 to 383. |
