Bit Parts: NetScout, JDSU Hint at M&A Wave

News Analysis Dan O'Shea, Analyst, Heavyreading.com 11/3/2014

Since we last checked in on Bit Parts, our optical components sector overview, we've seen one big M&A deal announced with more consolidation likely to come in 2015:

NetScout Systems Inc. (Nasdaq: NTCT) announced a $2.6 billion move to acquire monitoring and security assets from Danaher Corp. (NYSE: DHR). Though nominally more of a test and measurement acquisition, the Tektronix and Fluke Networks products NetScout is getting through this deal have a lot to do with optical element and network T&M. In any case, the deal comes as a strong sign to those watching both the T&M and optical sectors for more signs of a consolidation wave commencing. (See NetScout to Buy Danaher's Comms Unit .)

The Netscout-Danaher deal came up last week during the quarterly earnings report of JDSU (Nasdaq: JDSU; Toronto: JDU). That company is heading toward a corporate split to occur by late next year, and JDSU's planned Network and Service Enablement spin-off was already looking like a potential dealmaker in the T&M sector. Perhaps the NetScout-Danaher deal will put some urgency behind that ambition. (See JDSU Spin-Offs Look M&A-Ready.)

"The NetScout-Danaher merger is good for the industry because consolidation is needed," said Tom Waechter, president and CEO of JDSU, on the company's earnings call. "There is nothing that precludes acquiring businesses before our split is completed."

Meanwhile, industry analysts continue to suggest that JDSU's optical components spin-off could be headed for a merger date with Finisar Corp. (Nasdaq: FNSR). JDSU officials said they're continuing to see strong demand for 100G components, particularly in China, and that the burgeoning 100G metro market will help drive demand in 2015.

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In other components news, Calient Technologies Inc. has made a number of moves in the last month to broaden the appeal of its S-Series optical circuit switches. The vendor teamed up with a marketing partner for Europe, and also promoted Erik Leonard to senior vice president of sales and business development. On the technical front, Calient introduced an OpenDaylight plugin to enhance the programmability of its switches. The Leonard promotion is interesting: He'd been with Calient for just six months as vice president of service provider and digital markets, but in keeping with Calient's European ambitions, has extensive international sales experience. (See Calient Chooses Euro Sales Partner.)

— Dan O'Shea, Managing Editor, Light Reading