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Technology Stocks : JDS Uniphase (JDSU) -- Ignore unavailable to you. Want to Upgrade?

To: Glenn McDougall who wrote (4657)	1/18/2000 7:20:00 AM
From: uel_Dave	Read Replies (1) \| Respond to of 24042

JDS will swallow rival for $15-billion by Simon Tuck - Tuesday, January 18, 2000 News from The Globe and Mail globeinvestor.com Ottawa -- JDS Uniphase Corp. is buying one of its chief rivals in the fibre-optic equipment business for $15-billion (U.S.), by far the largest acquisition in Canadian high-tech history. Canada now has two Goliaths in fibre optics, JDS Uniphase and Nortel Networks Corp. The two Canadian firms are at the forefront of a huge push to construct an advanced worldwide communications network that will be able to carry electronic services and content as the Internet matures. The combination of JDS Uniphase with E-Tek Dynamics Inc. of San Jose, Calif., creates a gorilla of a company within the arcane but immensely profitable sector of equipment that boosts the capacity of fibre-optic cable, the high-speed sinews of communications networks. This would be JDS Uniphase's sixth acquisition since September. "They're very much like a gorilla -- and they're eating a lot of bananas," said Michael Urlocker, a technology analyst at Scotia Capital Markets Inc. in Toronto. He said the deal -- which easily tops Nortel's $7.6-billion acquisition of Bay Networks in 1998 -- creates the fibre-optics industry's most powerful player, a "dominant presence" in its sector. Mr. Urlocker said the acquisition will give the combined company extra technological breadth, an important consideration for its prospective customers, large telecommunications firms looking for a one-stop supplier. (Firms such as JDS Uniphase supply companies such as Nortel, which in turn sell to telecommunications companies.) Once it ingests E-Tek, JDS -- which says it is headquarted in Nepean, Ont. and San Jose -- will also expand its capacity significantly. That is a key consideration in its sector right now, as big customers race to upgrade their networks and are unlikely to brook any delay in meeting that goal. E-Tek spokeswoman Alison Reynders said the main reason for the deal is to ease capacity problems plaguing the companies. "We can't meet all the demand from our customers. We're becoming a bottleneck." She said the two companies will be able to share technical tips on how to boost capacity further. JDS Uniphase has felt the capacity crunch as well: The company, pointing to soaring demand, announced a $125-million expansion last month to add 2,500 jobs to its Nepean operations within a year. "We are right in the middle of a vortex of activity," chief executive officer Kevin Kalkhoven told shareholders at the time. "We almost have to double [manufacturing capacity] every year for the next couple of years." The deal will see JDS Uniphase issue 1.1 shares of its own stock for each common share of E-Tek. Of course, the soaring value of JDS Uniphase shares -- which rose more than eightfold in 1999 -- means that it can acquire the smaller firm for a comparatively small number of shares. The deal still requires a vote of shareholders and is subject to regulatory approval. After the transaction is completed, E-Tek will become a wholly owned subsidiary of JDS Uniphase. Together, the combined firm will have a market value of $76-billion, based on yesterday's closing values for the stocks. E-Tek had revenues of $72.5-million in the quarter that ended Jan. 1. JDS Uniphase, much larger, had sales of $230.1-million in the quarter that ended Sept. 30. The combined company will have more than 10,000 employees. Duncan Stewart, an analyst and portfolio manager at Tera Capital Corp. of Toronto, called the deal "strategically incredible." "There's no question this is a smart investment." He said the combined company will be a powerhouse within its own industry, since it combines top-ranked JDS Uniphase with what many analysts say is the No. 2 player, E-Tek. "It's not quite Microsoft, but more like Intel." But he said the deal may face turbulence from antitrust authorities. JDS Uniphase itself is less than a year old, born of a merger between JDS Fitel Inc. of Nepean, Ont., and Uniphase Corp. of San Jose. That merger was worth $4.7-billion. Meanwhile, Optical Coating Laboratory Inc. of San Jose said that its shareholder meeting scheduled for Jan. 25 will be held, but then adjourned until Feb. 4, to allow shareholders to consider additional information about the proposed merger of JDS Uniphase and E-Tek.