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To: Apollo who wrote (27612)	7/10/2000 4:30:31 PM
From: Tom Ardnij	Read Replies (3) \| Respond to of 54805

Apollo, I had the opportunity to hear each of the CTO's of JDSU and SDL at Clayton Christensen's May conference on disruptive technology. A short summary of their comments provides insight into change in the industry. Certainly, it is clear that the driving forces include the push toward integrating components into modules and the ongoing pressure for increased production levels. Listening to each of the gentlemen made it quite clear that the overwhelming pressure was for increased production. I think you hit it on the nose comparing JDSU's strategy to that of CSCO. It is apparent that JDSU is purchasing both productive capacity and R&D in CSCO like fashion. The big difference is the relative dearth of competition remaining, especially in fiber optic components. The antitrust division will certainly be looking closely at this one. I have the impression that there is quite a bit of overlap, but am honestly unsure. Best Regards, Tom

To: Apollo who wrote (27612)	7/10/2000 5:28:15 PM
From: tekboy	Respond to of 54805

Briefing.com's take... JDS Uniphase (JDSU) 116 3/16: The ink is barely dry on its purchase of E-TEK Dynamics, and JDS Uniphase is already back on the acquisition trail--and in a big way. Its newest target is SDLI, Inc. (SDLI 295 5/16), a provider of solutions for optical communications and related markets which makes network components such as laser pumps and specialized optical amplifiers. Under the terms of the transaction, SDLI shareholders will receive 3.8 shares of JDSU for each SDLI share. That equates to approximately $41 bln and represents a 50% premium for SDLI shareholders based on where JDSU closed on Friday. Crunching the numbers, it also means JDSU is going to pay roughly 153x trailing twelve month (ttm) sales for SDLI. When JDSU announced in January it was acquiring E-TEK for $15 bln in stock, it was paying about 66x ttm sales and providing a 58% premium for ETEK shareholders. Obviously, the price of growth in the booming optical fiber industry hasn't gotten any cheaper. Then again, the demand for optical fiber and the earnings momentum for these companies hasn't lessened at all which is why they can still command such high premiums. While the acquisition of SDLI would be a competitive coup for JDSU since SDLI is strong in "active" components whereas JDSU is strongest in "passive" optical components, there are underlying concerns about the transaction which may help explain why JDSU is indicated nearly 17 points lower. First and foremost, there are antitrust concerns as this acquisition would give JDSU an even more dominant position in the optical components space where it competes against companies such as Corning (GLW 256 11/16), Nortel Networks (NT 71 1/8), Alcatel (ALA 70 1/2) and Lucent (LU 55 33/256). On its conference call, all management could say was that it was to early to assess how regulatory agencies would view this merger. We suspect they will view it with a good deal of skepticism as the deal will make JDSU a gargantuan force in optical components. The key business for SDLI is its 980 nm laser pump which does overlap with some existing JDSU/ETEK products. Furthermore, in its SEC filings JDSU says that SDLI is a competitor in several markets: source lasers and pump lasers, modulators, laser subsystems and laser diode products. Secondly, there are concerns this deal will be dilutive. Management said, however, it expects it to be accretive from the time of its close going forward. Third, concerns about integration risks are evident, yet JDSU has demonstrated it is quite capable of successfully integrating its acquisitions. Regulatory issues, though, will be the biggest hurdle to overcome. If they can be negotiated-- and that's still a big "if"-- the price JDSU is paying for SDLI may prove to be a bargain as the combination of these two companies would provide greater manufacturing efficiencies, but more importantly, it would provide JDSU with greater product breadth and substantial pricing power in an industry growing at a huge pace.-- Patrick J. O'Hare, Briefing.com tekboy/Ares@goKinggo.com