Inside JDSU's Secret Acquisitions
In the past year, JDSU's made at least four acquisitions more than it's listed in public press releases -- including Fujian Casix Laser Inc. of China, Iridian Spectral Technologies Inc., Epion Corp., and Optical Process Automation, which have all been disclosed in recent filings with the Securities and Exchange Commission.
It's all part of a lower-key approach to acquiring smaller, more cutting-edge companies, as detailed by JDSU officials at the Optical Fiber Conference in March (see JDSU Switches Acquisition Strategy). Part of that approach, it seems, means keeping some of the acquisitions quiet. And maybe some of these aren't a big deal. After all, what's another $500 million to the company that spent $63 billion on just three of its biggest purchases last year -- OCLI, SDL Inc., and E-TEK Dynamics?
JDSU says there are several reasons why it opts not to publicize some acquisitions. "We make a judgment based on the size and materiality of the acquisition," says JDSU spokesperson Jeff Wild. "In some instances, we decide what we want to communicate based on timing or the competitive landscape."
Price was apparently an issue when it came to JDSU's purchase in April 2000 of Fujian Casix Laser, a maker of optical packaging and processing equipment. At the time of the buy, the purchase was not deemed to have any impact on JDSU's financials. So JDSU kept it out of the press release and refused to divulge it to reporters who called.
Subsequent SEC filings indicate that $60 million was spent on Casix -- certainly no pittance, but relatively small potatoes at the time.
"Materiality changes, based on our financial state," Wild asserts. When he started with the company five years ago, he notes, the acquisition of a European plant for $45 million was enormous news, "all we had in the world." Now it would be a drop in the bucket.
The competitive landscape may have factored into secrecy about JDSU's purchase of Ottawa-based Iridian Spectral Technologies Inc., a privately held maker of thin film filters for DWDM gear. A visit to this startup's Website reveals nothing about it having been bought by JDSU for $40.3 million in October 2000. The only place to find any real information on the buyout is in JDSU's SEC filings.
JDSU evidently purchased Iridian with an eye to improving its own thin-film techniques – and that may be why it was kept out of the limelight, analysts say.
To acquire small fry requires a certain discretion, says Mark Langley of Epoch Partners. Since startups usually have a single area of expertise, buying them clearly signals a firm's intent. "When a company announces an acquisition, it tells the world what it's doing, how it chooses to compete. It targets your intentions," he says. And that's not information companies always care to reveal.
And, Langley notes, another factor may also be at work: Making public the price of a newly acquired startup could encourage other potential acquirees to bargain more than they otherwise would.
Given JDSU's current restructuring mode, there also are internal forces working to keep JDSU's buyout binge quiet (see JDSU Deepens Reorg). With 5,000 employees set to be terminated worldwide, the company may not be eager to boast of expensive shopping sprees. "If I were just laid off at JDSU, I would not view an acquisition in the same way I would if I were still working there," Langley says.
Still, JDSU executives clearly indicated during last week's earnings call that the company didn't intend to give up its M&A activities. "We'll continue to look around at what compliments our product line," CEO Jozef Straus told analysts a week ago today. "An economic downturn can present very good opportunities to buy small companies."
– Mary Jander, Senior Editor, Light Reading http://www.lightreading.com