2/09/99 - JDS FITEL AND UNIPHASE MERGE, GO FOR KNOCKOUT PUNCH
Feb. 09, 1999 (FIBER OPTICS NEWS, Vol. 19, No. 6 via COMTEX) -- Manufacturers of active and passive optical components beware: There"s a bully headed your way. The heavy comes in the form of an anticipated merger between telecom equipment manufacturer JDS Fitel and component manufacturer Uniphase Corp., which could browbeat all oncomers.
If opposites attract, the consolidation of Nepean, Ontario-based JDS [JDS] and San Jose, Calif.-based Uniphase [UNPH] - expected to be complete in June - is proof perfect.
While JDS builds passive fiber optic products - such as wavelength division multiplexers, optical switches, isolators and WDM filters - Uniphase, manufactures active products, such as lasers, modulators and transmitters.
Together the two companies will have products to cover most needs of original equipment manufacturers and systems providers, and put all opponents in a position to be knocked out. The reason? The Dynamic Duo plan to go beyond simply supplying OEMs and systems providers with components. The new company, with $6.1 billion of capitalization according to Jan. 27 stock prices, intends to build modules for fiber systems.
No doubt the new intimidator would be able to shorten the time it takes to deliver modules to market. Without each other"s businesses, the companies would need to negotiate contracts for active or passive components, and thereafter rely on other companies to deliver parts on time.
"This looks like a merger made in heaven," says Lissa Bogaty, senior analyst at Salomon Smith Barney in New York. "The product lines look very complimentary."
However, Bill Diamond, vice president of marketing at E-TEK Dynamics [ETEK] in San Jose, Calif., a competitor of the new company, says E-TEK is not panicking at the thought of a new, larger competitor.
"From our point of view, one potential positive is that it looks like with their combination of products, they intend to move further up the food chain," Diamond says. "[JDS Uniphase] may start manufacturing amplifiers and other subsystems. This may strain the relationship between [JDS Uniphase] and its existing customers. We could end up picking up some new contracts because of this."
Today no one company has this large a combination of active and passive components, not even Corning [GLW] or E-TEK Dynamics, which will "have to take them very seriously," Bogaty says. In fact, other competitors that need to keep an eye on their milk money include Ortel [ORTL] of Alhambra, Calif., and SDL Inc. [SDLI] of San Jose, Calif.
Modules Drove The Merger
"A big part of the business case for the merger came from the fact that both Uniphase and JDS want to make modules," adds Anthony Muller, Uniphase chief financial officer.
Developing modules is a reasonably new market for both companies, and is something they could exploit to boost revenue.
Modules encompass both active and passive components, and fit into WDM and SONET systems. Winfried Horsthuis, vice president of strategy and business development at JDS Fitel, says the new company may develop optical amplifiers, configurable add/drop multiplexers, transceivers and cross connect modules.
"All of these products are part of the product portfolio of both companies, but we will develop new designs," Horsthuis says. "With more channels, networks are becoming more and more complex, so there is an increasing demand for modules."
While JDS Fitel and Uniphase have very little product overlap, they do have customer overlap. And although company execs refused to ID customers, clients include systems providers such as Lucent Technologies [LU] of Murray Hill, N.J.
The new, combined company will be called JDS Uniphase Corp. JDS Fitel and Uniphase expect the merger to be complete by June.
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