Now that JDSU has outlined its plan to split into separate optical components and network and service enablement companies, it's time to place bets on how quickly those spinoffs might acquire, get acquired or merge with other companies.
Analysts following JDSU (Nasdaq: JDSU; Toronto: JDU) think that could happen sooner rather than later, in particular for the optical spinoff. Jefferies & Co. analyst James Kisner and MKM Partners' Michael Genovese each wrote in separate research notes this week that Finisar Corp. (Nasdaq: FNSR) is the most natural partner for such a deal. Genovese added, "We do not think the companies will necessarily wait for the spin-out to be complete [in the third calendar quarter of 2015]."
During JDSU's analyst day event Thursday, even company officials appeared to acknowledge that the optical spinoff, called "Spin Co." for now, is destined to be a participant in sector consolidation, saying that nothing prohibits the new company from making a deal -- or even, as Genovese suggested, being sold by JDSU before the spinoff process is completed.
"We have pruned out a lot of our legacy and low-margin products recently to better position the company," said Tom Waechter, president and CEO of JDSU. "With the two companies, [Spin Co. chief Alan Lowe] and his team will have much more flexibility, so they can pursue acquisition opportunities, and grow out their portfolio and accelerate their business."
The optical components sector recently has seen its share of consolidation, but it continues to be a bit of a roller-coaster ride, characterized by wildly fluctuating pricing and product demand. (See Bit Parts: Following the Optical Money, Finisar Buys Its 100G Buddy and Fibercore Buys Fibertronix.)
The network and service enablement spinoff, called "Remain Co." until further notice, also could see its own share of M&A interest, much of it driven by JDSU, which has acquired at least three companies in the last couple of years. Waechter added Remain Co. will "continue to be acquisitive," with greater flexibility to more quickly pursue deals. The service assurance, application performance monitoring and test and measurement segments that group targets are seeing rapid change with the emergence of NFV and associated architecture evolutions. (See Spirent Spends $25M on Radvision VoLTE Unit, VeEX Acquires Agizer & Optixsoft and Ixia Hands Reins to NFV Star Mayer.)
JDSU officials said that more permanent (and colorful, we hope) brand identities will be chosen for Spin Co. and Remain Co. at a later date, but if the dealmakers quickly come calling, maybe the company can save the money that otherwise would be spent on new business cards. (See JDSU to Split in Two.)
— Dan O'Shea, Managing Editor, Light Reading