Would Intel Buy JDSU?
So far, the speculation seems to be closer to a wish than a real possibility. The rumor seemed to start when it was noted by several analysts that JDSU was a likely candidate to survive or be purchased in the ongoing consolidation of the telecom components market.
For instance, analyst Paras Bhargava of Canada's BMO Netsbitt Burns issued a note June 14 saying JDSU, presently trading at two times cash, might be a likely takeover target in the future, particularly for semiconductor companies like Intel that have expressed interest in optical components and have the money to make investments.
"I never said this was likely to happen," Bhargava maintains. "At some point, JDSU's price could make it attractive to the market. That's all."
Buzz also surrounded notes issued in response to JDSU's rumored interest in the optical components business of Nortel Networks Corp. (NYSE/Toronto: NT), which has been on the block for a while (see Nortel Falls Short in Long Haul).
"We believe significant consolidation is coming in the telecom optical component market," wrote Thomas B. Astle of Merrill Lynch & Co. Inc. in a note on JDSU on June 19. "The first strong indication of this is Nortel's decision to exit the optical components business." He goes on to say that JDSU is likely to stand as one of the long-term survivors in the market, along with Agere Systems (NYSE: AGR) and "a few Japanese players." Companies such as Alcatel SA (NYSE: ALA; Paris: CGEP:PA), meanwhile, will probably exit components permanently.
The link with Intel apparently came from speculation by Astle and others that JDSU has shifted its R&D to focus on transceiver integration and datacom optics, as well as on non-telecom parts.
Enter Intel, which has made a flashy showing at recent tradeshows such as OFC and Supercomm, hyping its own integration strategy and interest in optics (see Intel CTO: The Future Is Here!). Intel's also been feeling acquisitive. Indeed, it's been billing itself as a kind of optical components consolidator (see Intel Scoops Up New Focus Laser Unit).
Neither JDSU nor Intel had returned calls inquiring about the rumors at press time. So far, it seems to be a tempest in a teapot -- but anything's possible.
"While we would question the timing of such an acquisition in such a depressed telecom market, we would not rule out the possibility," wrote James Jungjohann and colleagues of CIBC World Markets in a note today. "Intel has been circling the sector like a vulture -- making several small acquisitions in the optics space over the past year."
Jungjohann noted that JDSU's stock rose today as a result of the rumor. But as this went to press, things had died down: Intel was trading at $18.67, down $0.57 (2.96%), and JDSU was at $2.79, down $0.18 (6.06%).
— Mary Jander, Senior Editor, Light Reading