Oplink Opts for $172 Million IPOOplink Opts for $172 Million IPO

The spectacular rise of JDSU Inc. (Nasdaq: JDSU), which recently merged with E-Tek Dynamics and is expected to merge with SDL Corp. (Nasdaq: SDLI), has put optical components in vogue on Wall Street.

On Friday, Oplink Communications Inc. was the most recent optical components player to participate in the party, filing its S-1 with the Securities and Exchange Commission (SEC) for a $172.5 million public offering of stock.

As with any optical components play these days, potential investors must be asking the question: What about JDSU? And it's clear in Oplink's S-1 that JDSU is considered both a customer and a competitor--as well as a litigant.

In Oplink's "Risk Factors," the warnings that companies must detail in their IPO filings, JDSU emerges on several fronts. The first involves Oplink's core customer base: "We depend upon a small number of customers for a substantial portion of our revenues," says the S-1. "Our top four customers together accounted for 75.0% of our revenues in the nine months ended March 31, 2000. Lucent Technologies Inc. (NYSE: LU), JDS Uniphase, Sycamore Networks Inc. (Nasdaq: SCMR) and Marubun Corp. accounted for 36.0%, 15.8%, 12.6% and 10.6% of our revenues for the nine months ended March 31, 2000. We expect that we will continue to depend upon a small number of customers for a substantial portion of our revenues."

Consider that, for the moment, Oplink's two largest customers are also competitors. Then consider another "Risk Factor," also in the S-1:

"In November 1999, E-Tek Dynamics filed a lawsuit against us in the United States District Court for the Northern District of California alleging infringement of E-Tek's patent relating to fiber optic couplers based on our manufacture and sale of our DWDM products. E-TEK seeks an award for damages and injunctive relief. Our DWDM products generated a majority of our revenues for the nine months ended March 31, 2000."

E-Tek was recently acquired by JDSU, which now puts Oplink in litigation with its second largest customer. It also raises the question of whether JDSU may now be able to get some of the products from E-Tek, rather than Oplink.

Oplink officials would not comment on the lawsuit, citing quiet-period restrictions. E-Tek officials said the company's corporate policy was to not comment on ongoing lawsuits.

Despite the legal wranglings, the march toward the IPO moves onward. Robertson Stephens is acting as the lead underwriter and Crescendo Ventures and Worldview Technology Partners are the supporting venture capitialists (VC), giving Oplink some familiar names on the financial front.

The company reported $20.6 million in revenue in the nine months ending March 31, up from $5.3 millon during the same period in 1999. Losses increased to $6.1 million, up from $1.7 million during the same period.

--R. Scott Raynovich, Executive Editor, Light Reading http://www.lightreading.com