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ASIP, T-Networks Reach Apogee

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News Analysis
Light Reading

Laser manufacturer ASIP Inc. added to its M&A resume today by acquiring T-Networks Inc. for an undisclosed sum.

The combined company will go by the name Apogee Photonics Inc. and is getting $9.7 million in funding as a launch gift. Investors participating include Atlas Venture, BlueRun Ventures, Finaventures, and Redpoint Ventures from the ASIP side; TL Ventures from the T-Networks side; and Intel Capital, which had invested in both companies (see ASIP Merges With T-Networks).

An apogee is the point where a planet or moon is furthest away in its orbit -- such as when Pluto gets to its furthest point from the sun and becomes even more icy, desolate, and hopeless. Of course, Apogee has a different spin on the name. "We like to think of it as the apex or the peak," says Mike Decelle, CEO of ASIP and, now, CEO of Apogee.

The deal is billed as a merger, but ASIP would seem to be the acquirer here. The company pulled off a similar trick last year with the acquisition of ThreeFive Photonics B.V., picking up $7.5 million from ThreeFive's investors in the deal (see Survival of the Smallest). While Decelle remains CEO, he says T-Networks will be amply represented in the Apogee executive ranks.

ASIP had raised $31 million to date, including the ThreeFive windfall. T-Networks bagged more than $60 million in three rounds, including a $30.6 million series that closed in 2002 and a $5.75 million dribble earlier this year (see T-Networks Takes In $30.6M and T-Networks Scores $5.75M).

ASIP and T-Networks both sell 10-Gbit/s lasers -- not the full transceivers, just the lasers. The difference is that ASIP targeted moderate reaches with a 1310nm laser, while T-Networks attacked the high-end with 1550nm devices intended for reaches of 80 km and beyond. By combining forces, the companies can cover a larger swath of the 10-Gbit/s space.

Breadth counts for something, because the market for optical lasers and transceivers is so finely segmented among different speeds, different reaches, and different laser types. Companies can choose to be a leader in one segment, but those that can cover more markets might have better long-term prospects, says Tom Hausken, analyst with Strategies Unlimited.

Hausken likens the situation to the recently concluded Tour de France, where Lance Armstrong won his seventh title. "He doesn't win all the stages. Somebody who's a specialist at that particular stage or who wants to go for broke wins the stage, but [in the end] they finish around 100th," Hausken says. "Every company can win a stage, but it's not too many companies that have breadth."

So, who would Apogee compete with? The big-name components suppliers -- Avanex Corp. (Nasdaq: AVNX), Bookham Inc. (Nasdaq: BKHM; London: BHM), JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU), and to some extent -- focus on integrated parts, selling transceivers and laser modules rather than the bare lasers Apogee deals in. While the big companies have their own lasers, Apogee is hoping they'll want to buy higher-performance parts for some applications.

When it comes to the 10-Gbit/s lasers themselves, Apogee will compete with the likes of Covega Corp., Emcore Corp. (Nasdaq: EMKR), Mitsubishi Electric Corp. (Tokyo: 6503), and Modulight Inc.

Competition might also arise from startups applying quantum dots or quantum well intermixing to lasers: Examples include Intense Ltd. and Zia Laser Inc. ThreeFive's technology might give ASIP a shot at this angle, too (see ASIP Connects Quantum Dots).

Apogee officials aren't giving details about headcount, although they admit the usual post-merger layoffs are coming. Decelle says ASIP and T-Networks had roughly the same number of employees and that Apogee will retain a "significant fraction of the total we have today," that total being in the "low triple digits." T-Networks had gone through a rough spot in 2003, shedding a few employees and losing an executive or two, and founder Steve O'Brien left sometime last year (see Headcount: Tossers, Headcount: Memo Minder, and Headcount: Family Time (Reprise)).

Both ASIP and T-Networks owned indium phosphide (InP) fabrication facilities, one of which will be shut down, although Decelle isn't revealing which one. As ASIP was based in Somerset, N.J., and T-Networks in Allentown, Pa., the fabs aren't that far apart.

— Craig Matsumoto, Senior Editor, Light Reading

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User Rank: Light Beer
12/5/2012 | 3:07:15 AM
re: ASIP, T-Networks Reach Apogee
So who bailed on the deal?......USVP, Greylock, Sequoia, Vitesse and InCubic!

User Rank: Light Beer
12/5/2012 | 3:06:58 AM
re: ASIP, T-Networks Reach Apogee

Very insightful observation. Thanks.

Fiber optics business is still brutal.
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