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Technology Stocks : Alcatel (ALA) and France -- Ignore unavailable to you. Want to Upgrade?

To: Bob Howarth who wrote (1524)	3/22/2000 10:25:00 PM
From: zbyslaw owczarczyk	Read Replies (1) \| Respond to of 3891

Alcatel Will Complain About JDS Uniphase's E-Tek Buy (Update3) By Erik Schatzker Alcatel Will Complain About JDS Uniphase's E-Tek Buy (Update3) (Updates with late trading.) Paris, March 22 (Bloomberg) -- Alcatel SA, Europe's No. 2 phone-equipment maker, said it will complain to U.S. antitrust enforcers that JDS Uniphase Corp. will command too much power to raise prices if the biggest maker of fiber-optic components is allowed to buy rival E-Tek Dynamics Inc. JDS Uniphase agreed in January to buy E-Tek in a transaction now valued at $20.3 billion. The U.S. Department of Justice is scrutinizing the proposal and interviewing customers of both companies to determine whether the acquisition would hurt competition in the market for parts that boost the capacity of fiber-optic networks. Alcatel, E-Tek's No. 1 customer, wants the acquisition delayed until it can find another source of components, said Alcatel USA Vice President of Product Strategy Paul Harrison. That process that could take as long as a year, he said. ``On some components there are no other suppliers,' Harrison said. ``We don't want to get into a situation where there's only a single supplier.' Complaints by big customers like Alcatel ``bode ill for the deal,' said Steven Newborn, a Washington antitrust lawyer with Clifford Chance, Rogers and Wells. Alcatel fears that JDS Uniphase will increase prices of some products once it completes the purchase. Currently, Alcatel can pressure the companies -- its two biggest suppliers of the parts - - to keep prices down by offering more business to one than the other. E-Tek got a third of its $72.5 million in sales from Alcatel in its fiscal second quarter, which ended Jan. 1. Widening Spread Alcatel, based in Paris, is the biggest maker of fiber-optic transmission systems used to send large amounts of phone and data traffic back and forth undersea. It also makes systems for land networks and plans to double its sales of those products in North America to $400 million this year, targeting phone companies such as MCI WorldCom Inc., Sprint Corp., Qwest Communications International Inc. and Level 3 Communications Inc. The difference, or spread, between the value of JDS Uniphase's offer for E-Tek stock and the price of E-Tek stock has widened to $61.99 from $28.77 Monday. That's a sign some investors are doubting that JDS Uniphase will get antitrust clearance to complete the acquisition. E-Tek fell 4 1/16 to 225 15/16 on the Nasdaq Stock Market and dropped as low as 220 3/4 after the close of regular U.S. trading. JDS Uniphase rose 3 7/8 to 130 7/8, rising as high as 131 7/8 after the close. Harrison said he hasn't been contacted by Justice Department investigators and didn't know if other Alcatel officials had been interviewed by phone or in person. Lucent Technologies Inc., the world's No. 1 maker of phone equipment and both a competitor and customer of JDS Uniphase and E- Tek, yesterday said it had been questioned by Justice Department lawyers over the telephone. Lucent said it took ``no formal position' on the combination. Nortel Networks Corp., the biggest maker of fiber-optic equipment, declined to comment. Addressing Worries JDS Uniphase and E-Tek haven't increased the prices they charge Alcatel since they announced the acquisition on Jan. 17, Harrison said. In addition, JDS Uniphase has tried to address Alcatel's worries by telling the company that it will be a valued customer after the E-Tek acquisition. Harrison said he received assurances from JDS Uniphase President Jozef Straus, who also visited Alcatel Chief Executive Serge Tchuruk. Still, Alcatel is concerned about getting enough thin-film filter components. The filters are used in a process known as wave- division multiplexing, or WDM, that combines the beams of multiple lasers on a single strand of fiber, boosting the capacity of optical networks. Once combined, JDS Uniphase and E-Tek, both based in San Jose, California, would dominate the WDM component market. Side Agreement JDS Uniphase and E-Tek also struck a side agreement on Jan. 17 to supply each other with needed components until they complete the acquisition. Unless JDS Uniphase could extend the agreement while customers like Alcatel find other suppliers, ``if I were betting, this would not go through' said Clifford Chance's Newborn. Alcatel's problem is that it has developed a dependency on both JDS Uniphase and E-Tek as its only suppliers of certain parts. Finding other suppliers that can meet Alcatel's strict quality requirements and make enough parts will be difficult, Harrison said. Components require a variety of tests before a customer like Alcatel will qualify them. The company likely will try to develop Corning Inc. as a second supplier, as well as look to smaller companies, Harrison said. Corning, the biggest maker of optical fiber, last month agreed to buy NetOptix Corp. in a transaction now valued at $2.3 billion to gain the filter production it needs to make more WDM components. JDS Uniphase is ``fully cooperating with the Justice Department and providing them with whatever information they require to evaluate the transaction,' Senior Vice President of Business Development Mike Phillips said yesterday. The company declined to comment on what its customers say to the Justice Department.