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AlcaLu Sells Avanex Stake

Craig Matsumoto
10/29/2007

Alcatel-Lucent (NYSE: ALU) has cut the last ownership ties with its former components division, having sold its 12.4 percent stake in Avanex Corp. (Nasdaq: AVNX).

The buyer was Pirelli SpA (Milan: PECI.MI), which has revitalized its optical communications division since fading into the background during the dotcom meltdown. (See Pirelli Buys Avanex Stake.)

Avanex announced the transaction today, along with news that Alcatel-Lucent has extended its supply contract by three more years. AlcaLu also signed a supply contract with Pirelli, according to Avanex's press release.

Pirelli's purchase price was not disclosed, but based on Avanex's $1.68-per-share closing price Friday, a 12.4 percent stake would be worth about $47.2 million.

Avanex shares today were up $0.20 (11.9%) to $1.88 in midafternoon trading.

It seems like ancient history, but seven years ago, Avanex was a star of the then-hot optical sector. At its peak, the company got pushed to valuations in the billions, as pundits like George Gilder put their weight behind the optical revolution. (See Avanex: Is it Worth $10 Billion? and Avanex (AVNX).)

By 2002, the optical market was getting toppled, and big firms wanted out of components. Avanex snared Alcatel Optronics and pieces of the Corning Inc. (NYSE: GLW) components division in 2003, seeing a chance to build up breadth in preparation for a telecom revival. (See Avanex to Buy Alcatel, Corning Units.)

Alcatel and Corning got stakes in Avanex as part of that deal. Corning sold off the last of its shares in late 2005.

Avanex struggled after the Alcatel/Corning sale -- as did Bookham Inc. (Nasdaq: BKHM; London: BHM), which had bought up the Nortel Networks Ltd. components division. By 2005, both were struggling with their cash positions, having inherited some high burn-rates with their acquisitions. (See Bookham, Avanex Shore Up.)

Pirelli, meanwhile, is continuing a comeback of sorts. The company sold its optical components division to Cisco Systems Inc. (Nasdaq: CSCO) and Corning in 2000 but has spent the last few years getting back into the game. Lately, Pirelli Broadband Solutions has been at tradeshows demonstrating tunable transceivers. (See Pirelli Returns , Pirelli Intros New XFP, and Pirelli Demos WDM-PON.)

— Craig Matsumoto, West Coast Editor, Light Reading

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Pete Baldwin
Pete Baldwin
12/5/2012 | 2:59:58 PM
re: AlcaLu Sells Avanex Stake
It's pointed out to me that Pirelli did announce its purchase price: Gé¼33.4M, or about $48.2M.
^Eagle^
^Eagle^
12/5/2012 | 2:59:56 PM
re: AlcaLu Sells Avanex Stake
Craig,

I think some of us would like to know more about the part of the announcent(s) that were detailed:

Avanex has new 3yr supply agreement with ALU. For what parts? How much $$ is COMMITTED under the new supply agreement vs how much is only forecast. Usually supply agreements have both components as part of the agreement. What does this mean in terms of actual Avanex revenue over the next 3 years?

Similar for Pirelli: what specific products did ALU sign up to take from Pirelli? for Pirelli components, as of 1.5-2 yrs ago they had almost zero sales.. no share of tunable laser market, no share of transponder market, no share of xfp market. I have seen the announcements of Pirelli having these products qualified and released over the last 1-2 years. It would be really interesting to know how large Pirelli's sales of these modules and components are annually. And even more interesting to know more about the supply agreement with ALU. As of not so long ago, Pirelli was selling very little to ALU. How large is the 3 year supply agreement Pirelli signed with ALU? For which specific products did Pirelli get a "win"? What does this to to other suppliers??? for instance, did Pirelli win at ALU with 300pin transponders? if so then this hurts several players. or did Pirelli win at ALU for tunable lasers.. this would hurt other players.. or did Pirelli win for xfp sales? Again, would hurt some players.

Some investigation and perhaps an article on how the shares are shifting around would be very useful and interesting to us readers.

sailboat
alcabash
alcabash
12/5/2012 | 2:59:54 PM
re: AlcaLu Sells Avanex Stake
Sailboat,
The details of the previous supply agreement were disclosed by Avanex to the SEC. If I remember well, it was a share commitment (not a $ commitment), although it seems to be working quite well as AlcaLu remains a 30% customer for Avanex.
I could not find any details on the Pirelli-AlcaLu contract.
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