Emcore Strengthens Its Core
Melinda Peer, 04.10.08, 8:30 PM ET
Emcore is fattening up, buying more assets from Intel and expanding in China, as a prelude to splitting itself in two.
On Thursday, Emcore (nasdaq: EMKR - news - people ) said it agreed to acquire enterprise and storage assets from the optical platform division of Intel (nasdaq: INTC - news - people ), in addition to the company's connects cables business, for 3.7 million shares of restricted stock.
The transaction bolsters Emcore's fiber-optics business. Fiber optics--pervasive in telecommunications and computer networking--uses thin, transparent fibers to transmit high-speed video, voice and data. Optical fibers are more adept at long-distance communication than metal wires. In addition to fiber optics, Emcore operates a solar photovoltaic business, which converts light into electrical energy.
Emcore will acquire optical cable interconnects, which are used in computing clusters; intellectual property, inventory, fixed assets and technology relating to optical transceivers.
This is Emcore's second acquisition from Intel in less than six months. In December, Emcore acquired the telecom-related portion of Intel's optical platform division for $85 million. The deal was motivated by Emcore's desire to increase its presence in the telecommunications market while expanding its fiber optics product portfolio.
Emcore's move to beef up its visibility is apparently part of the company's larger plan to spin off its two business segments--fiber optics and photovoltaics--into separate corporations. On April 4, the company's board authorized management to prepare a strategic plan for the separation on the same day that it appointed Reuben Richards as executive chairman. Dr. Hong Hou, the company's president and chief operating officer, replaced Richards as chief executive.
Assets acquired from Intel's optical platform are expected to add $45 million to Emcore's sales over the next 12 months. The connects cables business, however, is expected to have the fastest growth, with gross margins projected to exceed 50%.
"This acquisition will provide additional manufacturing efficiencies through economies of scale and vertical integration, benefiting our enterprise, storage, telecom, cable and high-performance computing customers," said Executive Chairman Reuben Richards of Emcore.
Also on Thursday, Emcore agreed to supply one of China's largest energy companies, XinAo Group, with concentrator photovoltaic systems for its clean energy program. XinAo and Emcore plan to build a jointly owned factory in China to produce the solar energy systems for the Chinese market.
"Through our wholly owned subsidiary, Emcore China, located in the same city as XinAo, we will be able to form an efficient and cost-effective manufacturing capability to serve XinAo and other demands in the Chinese market," said Vice President Earl Fuller.
Emcore shares gained 23 cents, or 3.3%, on Thursday, closing at $7.19. Intel shares closed up 66 cents, or 3.1%, at $22.08.
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