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Would Intel Buy JDSU?

Light Reading
News Analysis
Light Reading
6/21/2002

This week's rumor mill put JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU) in line for purchase by Intel Corp. (Nasdaq: INTC).

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
http://www.lightreading.com

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mordecai
mordecai
12/4/2012 | 10:13:49 PM
re: Would Intel Buy JDSU?
In this industry, nothing surprises me anymore. A better question would be something like--

'If optical gurus like the guys at JDS can't make this a business, then would intel mgmt do a better job?'

or

'Would it be a good idea at all, if intel bought jds?'

fun rumour though....
Rook
Rook
12/4/2012 | 10:13:47 PM
re: Would Intel Buy JDSU?
I have to believe that while doing due diligence Intel would be sharp enough to realize that there isn't any value behind the JDS facade. It's a mess; a house of cards.

They'd be better off snapping up some good new technology (cheap) from a start-up or two and using their manufacturing and marketing know-how to just make JDS obsolete.
switchrus
switchrus
12/4/2012 | 10:13:46 PM
re: Would Intel Buy JDSU?
"They'd be better off snapping up some good new technology (cheap) from a start-up or two and using their manufacturing and marketing know-how to just make JDS obsolete."

This industry is getting like a drinking game, last man standing and all that sort of thing. No telling how the game will end, but one thing is pretty clear now, there will be few standing once it's over.

One thing about Intel buying someone, anyone, is the deep pockets and yes know-how of a company like Intel.
OptixCal
OptixCal
12/4/2012 | 10:13:46 PM
re: Would Intel Buy JDSU?
Actually, JDSU has some very good technology. Unfortunately, in the rush to garner an ever larger piece of the optical pie, by buying up numerous optical component startups, they also inherited that cumulative overhead. The biggest problem JDSU seems to have is that they still seem to be struggling to integrate all of those disparate optical component companies, each companies tech, sales and marketing teams not to mention all those seperate pockets of purchasing and administrative personnel in all those companies. I wouldn't be surprised if their overhead is still 25$ - 30% higher than it should be. JDSU would likely cost Intel a lot of money, (more likely stock, much like JDS used for their acquisitons) but probably not half as much as the total of what they paid for all those companies they bought 24 months ago.
sigint
sigint
12/4/2012 | 10:13:42 PM
re: Would Intel Buy JDSU?
In this industry, nothing surprises me anymore. A better question would be something like--

'If optical gurus like the guys at JDS can't make this a business, then would intel mgmt do a better job?'

or

'Would it be a good idea at all, if intel bought jds?'

fun rumour though....
__________________________________________________

The feeling inside Intel is that they had made a grave error by dumping the memory business when the going was tough - only to find that everyone BUT Intel made money from it a few years down the line. That won't be allowed to happen again.

Intel is now recognised as the largest communication chips maker, in addition to their dominance in the processor market. This 'leadership' was obtained by default, I guess, given the sorry state that Motorola SPS is in. I guess Intel would like to consolidate that position and retain its leadership as the market picks up.

And let's face it, however pessimistic we may be about the communications industry, communications without optics is no longer concievable.

It's not a question of SHOULD but 'HOW SOON' should Intel by JDSU.

BobbyMax
BobbyMax
12/4/2012 | 10:13:40 PM
re: Would Intel Buy JDSU?
The combination of JDSU and Intel would be not fruitful to any company. Intel has bought over a dozen optical companies, but it has not made a penny. Similarly it had bought a few data networking companies and did not make any money.

Intel is not an research company and when it comes to doing any fundamental research, the ompny simply cannot perform. It is esentially a brick manufacuring company and it has good klins.

There is not much demand for semiconductor products. Rhe state of the present market will never return. The US economy is very bad in spite of various proclaimations and propoganda. Trillions of dollars have been lost by the foreign investors. The economic prosperty campaign continues so that more and more money flows and abroad. And the good thing is that this money never has to be returned.

What could be a better deal!
dwdm2
dwdm2
12/4/2012 | 10:13:39 PM
re: Would Intel Buy JDSU?
"'Would it be a good idea at all, if intel bought jds?'

fun rumour though...."

No. JDSU oughta be able to stand on its own feet. Besides, turning Intel into a giant monopoly for optical components (like the computer CPU) is not going to help the ON industry. I'd rather like to see Intel competing with JDS.
Sparxe
Sparxe
12/4/2012 | 10:13:38 PM
re: Would Intel Buy JDSU?
BobbyMax said in post 8

The combination of JDSU and Intel would be not fruitful to any company. Intel has bought over a dozen optical companies, but it has not made a penny. Similarly it had bought a few data networking companies and did not make any money.

Intel is not an research company and when it comes to doing any fundamental research, the ompny simply cannot perform. It is esentially a brick manufacuring company and it has good klins.

There is not much demand for semiconductor products. Rhe state of the present market will never return. The US economy is very bad in spite of various proclaimations and propoganda. Trillions of dollars have been lost by the foreign investors. The economic prosperty campaign continues so that more and more money flows and abroad. And the good thing is that this money never has to be returned.

What could be a better deal!"

I read your post on Redback and you made some good points. Then I read this one about Intel / JDSU and I see a frustrated European or Canadian, grasping at air. You took some cheap shots at the USA. I for one don't like it.

You said that Intel was not an R&D company. Please tell me how many companies you know that will spend FIVE billion dollars on R&D in 2002? Then see if they are not at the edge of R&D.
This week Intel announced it was leaving the hosting business. It was not making money there and it was alienating its own customers. As far as JDSU, Intel may buy some assets, but I doubt they want to be so broad in the optical game.

Yes there is little demand for semiconductors, because the whole world loaded up on 200-600mz w 32 megs of RAM, purchaced during the Y2K scare and the dot-bomb craze. You should realize that the bulk of worldwide computers are less-then 500mz running windows 95-98. Eventually they will be excellent boat anchors. When that happens, Intel and AMD will still rule the day.

I agree, there is plenty of foreign money leaving the US markets, as the dollar weakens. Its happened before. A weaker US dollar makes sense for everyone. Yes, these are tougher economic times in the US, then the administration lets on. If you think the American on the street does not know the truth, you are wrong.

However, don't gloat too hard, cause tough times in the US, mean hard times to the whole world. Everyone in finance knows when the US sneezes everyone gets the cold. It happened before and it will happen again. So be smart and ignore your own propaganda. Because every bust in the US, brings a boom sooner or later.

Lets be clear. I am not putting ANY country down. I am simply defending my own economy.

Respectfully,
Sparxe Nj USA
sigint
sigint
12/4/2012 | 10:13:35 PM
re: Would Intel Buy JDSU?
Saprxe,

For whatever reason, Bobby Max alias Harvey Mudd seems to believe that Lucent is the centre of the universe and everything else around is incidental and dispensable.

To say that Intel cannot do any R&D displays his ignorance - in the Chip space no other company drives technology the way Intel does. (The big blue seems to have slowed down considerably in this sphere.)

But he does have a point about flight of capital from the US - its something that should concern us all. Unfortunately, the present dispensation at the White house don't seem to have woken up to this reality.
sigint
sigint
12/4/2012 | 10:13:34 PM
re: Would Intel Buy JDSU?
"They'd be better off snapping up some good new technology (cheap) from a start-up or two and using their manufacturing and marketing know-how to just make JDS obsolete."

Right. This will enhance the environment of competition as well.
__________________________________________________

Don't we have cut-throat competition already ?

Besides, consider the fact that with big player like NT and ALA moving out of the optical components business, we do need at least ONE player with deep pockets to sustain R&D in this area.

Without R&D and rapid innvoation, optical could quickly lose market to a competing technology like wireless.

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