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

To: t2 who wrote (4727)	1/19/2000 8:11:00 AM
From: SurfForWealth	Read Replies (1) \| Respond to of 24042

Greetings, from todays Canadian Financial Post! Very bullish IMO. Cheers!!! Wednesday, January 19, 2000 Big JDS deal will come under scrutiny Stock rises 2% Jill Vardy Financial Post OTTAWA - Investors and analysts applauded JDS Uniphase Corp.'s $15-billion (US) takeover of E-Tek Dynamics Inc., but the sheer size of the deal means it faces scrutiny from U.S. antitrust regulators. JDSU's stock jumped 2% to $195.69 (US) on Nasdaq yesterday. The acquisition was announced late on Monday night. "The rapid pace of merger and acquisition activity in the optical components market, with JDSU helping set the pace, has transformed JDSU into an industry juggernaut," said Nikos Theodosopoulos, an analyst at Warburg Dillon Read LLC in New York. The combination, if approved by E-Tek shareholders and regulators, creates a behemoth that can supply almost every type of fibre-optic component required to make high-speed communication networks, analysts said. The acquisition will face scrutiny from the U.S. Securities and Exchange Commission and must be approved under the U.S. Hart-Scott-Rodino (HSR) Antitrust Improvements Act. The act compels JDSU to provide information to the antitrust division of the U.S. Department of Justice and the Federal Trade Commission. This is the seventh acquisition since JDS Fitel and Uniphase Corp. announced in January, 1998, they were joining forces. "The 800-pound gorilla just gained 50 pounds," said Robert MacLellan, technology analyst at CT Securities, who predicts JDSU will continue to acquire more companies. "They can't afford not to." He said antitrust objections are possible, but probably will not succeed in scuppering the deal. "Most of the optical business is still in the hands of the big telecom equipment vendors [like Lucent Technologies, Nortel Networks and Alcatel] who all make components for their own use. But there is an increasing trend to go to the suppliers like JDSU." JDSU executives say they're confident the deal will be approved. "We don't dominate the market. The market is still dominated by internal capabilities. What we are simply doing is responding to the requests of our customers," said Kevin Kalkhoven, JDSU's CEO. Jozef Straus, JDSU's president, said the aim of the acquisition is to combine the efforts of both companies so customer requirements can be met better and faster. "What we're seeing is despite our desire to expand capacity two times [by building new manufacturing plants], that rate of expansion is not adequate," Mr. Straus said. "The combined efforts here... will allow us to match better the needs of our customers with our manufacturing capacity. So we have an immediate benefit." JDSU's customers reacted positively, the company said. So did analysts, almost all whom congratulated the company executives on the merger during a conference call yesterday morning. Customers of JDSU, E-Tek and other fibre optic suppliers are desperate for additional capacity in the industry. The merger will pull down costs and allow the company to offer a broader product line, Mr. Kalkhoven said. Market demand for this equipment could well be increasing by 3-4 times, so JDSU's plan to double manufacturing capacity this year is not enough, Mr. Kalkhoven said. "The demand continues to outstrip anything we could do, including the expansions announced in December," he said. "It is our strong belief we can go a long way toward satisfying our customer requirements." The acquisition also allows JDSU to get its hands on the valuable and scarce fibre-optic workers now employed by E-Tek. "There is a crippling lack of optical design talent in the marketplace," Mr. MacLellan said. "The boom in optics has caught everyone by surprise and there is a drastic shortage of optical engineers." Analysts say the acquisition will prompt some big changes in the fibre optic industry, but it's not clear if or how competition will suffer. Some of JDSU's biggest customers - Lucent, Nortel and Alcatel - also have their own fibre optic manufacturing concerns that compete with JDSU in small niches of the market. That may prompt them to raise anti-trust concerns with regulators. However, they're also customers of JDSU and E-Tek, and may conclude the safer supply of optical equipment makes the deal palatable. The 15-billion (US) purchase price also increases the relative value of their own optical divisions. Nortel shares, for example, rose yesterday on speculation it will spin off its own optical business. The JDSU purchase may prompt other independent fibre optic businesses, such as SDL Inc. and Ortel Corp., to search for rich buyers as well. Meanwhile Corning, the world's biggest vendor of optical amplifiers, is expanding its fibre optic components business and still poses stiff competition to JDSU.