Alcatel Acquires Fiber Bragg Grating Startup

Alcatel Optronics, aworld leader in opto-electronic components for telecommunications systems,today announced that it has entered into an agreement to acquire privatelyheld Innovative Fibers, Inc., the world leader in DWDM optical filters knownas Fiber Bragg Grating technology (FBG)*, for US$175 million. The dealsignals the continued commitment of Alcatel Optronics to expand its activityin the fast growing domain of passive components for DWDM systems as well asin North America.

The telecommunications industry is in a period of phenomenal growth.Operators are accelerating deployment plans for high-performancetelecommunications systems to keep up with the explosive growth in bandwidthdemand, and as a result system manufacturers are pushing their suppliers ofcritical opto-electronic components for more sophisticated solutions andreduced development and delivery times. The acquisition of InnovativeFibers strengthens Alcatel Optronics' ability to quickly deliver highlyintegrated, cost-effective opto-electronic solutions to meet these demands.

Innovative Fibers' key technological expertise is the development andmanufacture of Fiber Bragg Gratings, a passive optical component criticalfor multi-channel Dense Wavelength Division Multiplexing (DWDM)applications. Passive components process and modify the signal along theoptical path. As system manufacturers request the integration of more andmore functions at the component level, it becomes critical for componentmanufacturers to have access to a wide range of both active and passiveoptical technology. Already a world leader in active components, AlcatelOptronics will offer a unique active and passive portfolio thanks to theacquisition of Innovative Fibers. Alcatel Optronics will market InnovativeFibers' existing standalone products and will also integrate the technologyinto its portfolio of optical interface and amplifier modules - speedingdelivery of highly-integrated solutions and help lower design, developmentand manufacturing costs for Alcatel Optronics' customers.

Gain Flattening Filters (GFFs), which are one of the most commonapplications for FBGs, are used in DWDM systems to assure that eachwavelength on a single fiber is of equal amplitude, thus optimizing qualityof transmission. Alcatel Optronics is the world's number one supplier ofGain Flattening Filters (GFFs) for submarine applications. InnovativeFibers is the technology leader for terrestrial GFFs. This strong potentialsynergy presents an extraordinary opportunity for Alcatel Optronics to leadin covering all GFF applications for DWDM systems.

Moreover, one of the key elements of a DWDM system is the receive filterwhich separates the different wavelengths. Innovative Fibers masters theathermal packaging of these filters, allowing compliance with the toughestspecifications for transmission systems which must operate over a largetemperature range. The integration of this athermal packaging withinAlcatel's terrestrial transmission systems will soon help Alcatel to offerDWDM systems with a capacity in excess of 160 wavelengths.

Christian Reinaudo, President of Alcatel's Optics Group, stated: "Throughthis acquisition, Alcatel will strengthen its global leadership in alloptical networking technologies and Alcatel Optronics will continue itsestablished record of rapid growth. This deal will also allow us toreinforce our worldwide number one position in submarine and terrestrialDWDM systems."

Benoît Lavigne, President and co-founder of Innovative Fibers, noted: "Wewill be able to leverage Alcatel Optronics' existing customer base and salesforce to fully capitalize on our growth potential as a supplier of FBG basedfiber-optic components. Alcatel's financial and technical resources willalso allow us to significantly expand our manufacturing capabilities to meetthe rapidly growing customer demand for FBG based components. And bypooling our R&D resources, we can better and more quickly meet ourcustomers' demands for innovative components".

Based in Gatineau, Quebec, Innovative Fibers was founded in 1995 by BenoîtLavigne and Bernard Malo, who worked for 6 years at the CanadianCommunications Research Center (CRC) on FBG technology. The company employsapproximately 220 people, including a highly skilled technical team.Completion of the transaction is subject to approval by Innovative Fibers'shareholders and other customary closing conditions. The transaction isexpected to close in approximately four weeks.

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