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

To: SJS who wrote (7018)	3/1/2000 6:41:00 PM
From: Glenn McDougall	Read Replies (2) \| Respond to of 24042

With a little help from our SDLI friends the following... SDL Joins the Optical Components Shopping Spree By Brian Graney (TMF Panic) March 1, 2000 Continuing the consolidation trend within the fiber optic components market, active optical components and module maker SDL Inc. (Nasdaq: SDLI) agreed this morning to acquire privately held high-speed transmission and receiver modules developer Veritech Microwave for $590 million in stock. SDL moved up 11% thanks to the deal, which will extend the company's manufacturing and customer base and provide extra technological know-how for developing new products to address the high bit-rate needs of its optical networking equipment customers. Besides the everyday business synergies justifications, SDL is acquiring Veritech for another very good reason -- because it can. With its stock up more than 1,400% in the past year, SDL has the kind of high-powered currency that would send your average G-7 finance minister into a catatonic state of world-domination ecstasy. Based on the firm's share price of $393 1/4 on Feb. 28, the $590 million purchase price will require a mere 1.5 million SDL shares. A year ago, when SDL's shares were changing hands at a pre-split $54 15/16, that same price tag would have required the company to pony up more than 10.7 million of its shares. As in high schools everywhere, popularity in the stock market carries with it certain privileges. Instead of dating the football team or running for student council president, SDL, chief rival JDS Uniphase (Nasdaq: JDSU), and fellow photonic player Corning (NYSE: GLW) are using their newly found market popularities to consolidate the components industry. But while today's deal is only the second acquisition for SDL in the past year, JDS Uniphase and Corning have inundated investors with a dozen deals between them in the past six months. And why not? With more and more fiber being lit every day and executives at Cisco Systems (Nasdaq: CSCO) estimating that bandwidth demand will increase tenfold every two years, the optic components companies are in a sweet spot and have more business than they know what to do with. SDL recently told one sell-side analyst that demand for some of its optical product lines is "incredible." The acquisition of Veritech should help ease some of those supply demands, most notably in modulators for 10 Gigabit per second (Gbps) networks, but dealing with capacity constraints will continue to be one of the major challenges facing SDL and other component companies. According to Brian McFadden, an executive at optical equipment vendor Nortel Networks (NYSE: NT), the more efficient, semiconductor-like manufacturing processes will not only help allay the current capacity constraints but also add value by getting component-level costs down for the equipment vendors. "That's the next frontier and I believe a lot of people are investing money there," said McFadden, general manager and vice president of Nortel's OPTera Solutions unit. SDL is moving along that road, using semiconductor wafer fab equipment to boost yields for some of its products. But then again, making 980 nm pump modules and OC-192 lithium niobate modulators is not quite the same gig as making Pentium chips. That's a technological fact of life that investors -- many of whom are prone to rely too heavily on yesterday's silicon-based model as an analytical framework for understanding today's optical component market -- need to keep in mind.