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Finisar Buys a Bit of Infineon

Light Reading
News Analysis
Light Reading
1/25/2005

Following a bitter war of words over a protracted acquisition deal that turned sour, Infineon Technologies AG (NYSE/Frankfurt: IFX) has finally sold some, but not all, of its Fiber Optics Business Unit to Finisar Corp. (Nasdaq: FNSR) in a stock deal worth about $50 million (see Finisar Buys Infineon Unit).

Earlier this month the original deal, which comprised the sale of the whole of the fiber optics unit, was canceled, with the two firms pointing the finger of blame at each other (see Infineon Calls Off $206M Sale, Finisar Responds to Infineon, and Finisar Further Rebukes Infineon).

But with the verbal fisticuffs over, the two firms have agreed on a scaled down deal, which sees Finisar take on the "inventory, fixed assets and intellectual property associated with the design and manufacture of fiber optic transceivers," including "a broad range of 10 gigabit transceiver designs," in exchange for 34 million Finisar shares.

At the close of the markets Monday those shares, which give Infineon a 13 percent stake in Finisar, were worth $1.41 each, valuing the deal at $47.9 million. That's a mighty drop from $232 million, the value of the original deal struck in April 2004.

The sale has been approved by the Finisar board and doesn't require regulatory or shareholder approval; it is expected to be completed by next Monday, January 31.

In addition, the duo have agreed not to make any claims or seek compensation for the collapse of the previous deal.

With Infineon's transceiver sales amounting to $12 million in the fourth quarter of 2004, the sale value may about equal annual revenues, though Infineon says that calculation is "unsafe."

A spokesman says the transceiver sales are "not stable from quarter to quarter, so you can't add up the year's sales in that way." He wouldn't say what transceiver revenues were for the whole of 2004.

He also wouldn't comment on the prospects for the 1,200 affected Infineon employees, as the deal does not include the transfer of staff. But they don't look good. Once the sale to Finisar is complete Infineon will close three components plants -– Berlin and Munich in Germany and Longmont in Colorado -- that currently employ 350.

The spokesman says Infineon will now start discussions with employees and unions about the future, and that the fiber optics businesses that weren't sold to Finisar would be "restructured, but we are not releasing any further details."

Infineon has retained its FTTH and parallel optical components businesses, and a unit that makes plastic optical fiber components for the automotive industry. The latter will be incorporated into Infineon's Automotive and Industrial Multi Market Business Group. The spokesman says there are no current plans to seek bidders for the other remaining business units.

— Ray Le Maistre, International News Editor, Light Reading

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