Kymata: For Sale?
The article says that Kymata is in talks about "a possible trade sale" that would value the company at "about £300m" (US$425 million) and that J.P. Morgan & Co. (Nasdaq: JPM) is handling the deal.
It's possible this information was leaked to the Financial Times in an effort to flush out other potential buyers for Kymata. In other words, a deal may be imminent.
Light Reading has not been able to verify if any serious bidders have emerged, though rumors of a possible sale to Alcatel Optronics (Nasdaq: ALAO; Paris: CGO.PA) have been circulating for months.
Other potential buyers cited by the Financial Times include Corning Inc. (NYSE: GLW), IBM Corp. (NYSE: IBM), and Marconi Communications PLC (Nasdaq/London: MONI). IBM already has a small stake in Kymata (see IBM Moves Into Integrated Optics).
The price of £300 million in the Financial Times might be optimistic. The value of companies making arrayed waveguide gratings (AWGs) has slumped since last year. Bookham Technology PLC (Nasdaq: BKHM; London: BHM), another company in the same market, has seen its share price plummet from about $80 last summer to $6.20 today, giving it a market capitalization of $740 million. And Bookham is a more mature company that has made it to the public markets and has an established customer base. It's unlikely that Kymata, a private company, has built a substantial revenue base.
Kymata has an estimated staff size of 500. With an average annual expense per employee of $100,000, low for an optical company of Kymata's size, the company's burn rate is likely to be at least $5 million per month.
Kymata has raised a total of $162 million in funding to date, the latest round of $67 million coming last November when its valuation was put at around $500 million (see Kymata Snares Another $67M). Not long after the last round of funding, Kymata's CEO, Brendan Hyland, stepped down under mysterious circumstances (see Kymata CEO to Step Down).
Selling at or below $400 million means it's likely a lot of investors will be losing money or, at best, breaking even. With the current telecom slowdown, the prospect of growing revenues appears remote.
— Peter Heywood, Founding Editor, Light Reading