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Optium, Finisar Bulk Up

Consolidation in optics is all the rage, as Optium and Finisar show this week

March 27, 2007

3 Min Read
Optium, Finisar Bulk Up

With OFC/NFOEC a backdrop, two optics players have announced three acquisitions in the last two days.

Optium sees the Kailight
Optium Corp. (Nasdaq: OPTM), best known as a manufacturer of 10-Gbit/s transceivers, today announced its purchase of Kailight Photonics Ltd. in a deal that gives it instant entry into the market for 40-Gbit/s optical transmission products. (See Optium to Acquire Kailight.)

Kailight and its 40-Gbit/s transponders have been receiving a lot of attention lately, as the market for higher-bandwidth optical links is finally taking off. Kailight shifted to the 40-Gig market last year and says it has received purchase orders and is in testing with five vendors. (See ROADMs, 40G Spark OFC/NFOEC, Kailight Ships Transponders, and 40-Gig Gets Extended.)

For Optium, this is a relatively cheap entry into the 40-Gig space. The purchase price is about $35 million, including all capital stock, stock options, and debt. Optium could owe up to an additional $5 million to holders of Kailight capital stock and stock options if it reaches certain performance milestones. The deal is expected to close within the next 45 days, and Kailight should begin contributing to earnings early in 2008.

Finisar takes two
On Monday, Finisar Corp. (Nasdaq: FNSR) revealed it had bought Azna LLC and Kodeos Communications Inc. for a combined price near $28 million in deals primed to help it push further into the telecom space. (See Finisar Makes Acquisitions.)

Until a few years ago, Finisar sold almost exclusively to the enterprise, but it has been steadily expanding its product portfolio to support telecom applications. These acquisitions, which add long-reach components that fall in the middle of the network, fit in nicely with its goal to offer both telecom and datacom support. (See Finisar Ignites Optics Explosion and Finisar: Bookham Wouldn't Wash.)

"Both acquisitions will help broaden our product line in the telecom space and expand our sales there," says Finisar chairman and CEO Jerry Rawls.

Rawls noted his company's need for long-reach optics, saying that prior to the acquisitions, Finisar's product offerings in telecom had been "relatively narrow." As for the product lines Finisar acquired, Rawls touted their "ability to transmit over longer distances and at lower cost" and noted that both companies already have products they sell to Tier 1 telcos.

Azna, founded in 2002, has 58 employees and specializes in components and subsystems based on directly modulated lasers designed to provide lower cost and longer reach than those based on externally modulated lasers.

Kodeos's main selling point is its line of 10-Gbit/s tunable transponders, which enable longer-distance transmission and higher-dispersion tolerance.

John Harmon, of Needham & Co. , notes that the Finisar acquisitions "fill in two significant holes in its product line -- tunable lasers and 10 Gbps tunable transponders -- and which also help pave the way towards the 'holy grail' of tunable transponders."

Finisar will buy Azna for an initial consideration of $19.7 million, which includes $2.7 million in cash and two convertible promissory notes worth $15.6 million and $1.4 million. These notes are payable in cash or in Finisar shares, at the company's discretion.

Finisar's Kodeos purchase includes an initial consideration of $7 million in cash. But Finisar may owe an additional $2.5 million in cash to certain interest holders, which is contingent on the company's performance. It may also pay an additional $1 million to Kodeos workers for reaching certain milestones.

— Ryan Lawler, Reporter, Light Reading

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