Inside JDSU's Secret Acquisitions

In the public's eye, JDS Uniphase Inc. (Nasdaq: JDSU; Toronto: JDU) is known as a buyout animal that has scarfed up giant companies such as SDLI and ETEK (see JDS Uniphase (JDSU) and JDSU: Less from More). Not so fast. The company now appears to be shunning the monster meals, but it's been indulging a new appetite -- for quiet little midnight snacks.

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.

JDSU's Shopping List 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
fk 12/4/2012 | 8:29:31 PM
re: Inside JDSU's Secret Acquisitions Any relation to JDSU? :^)
allidia 12/4/2012 | 8:29:27 PM
re: Inside JDSU's Secret Acquisitions Essentially JDSU is not buying companies with 100+ employees and revenue... So what does this mean for startups like Lightchip,Axsun, and Agility who have raised large sums of $$ and built up large staffs...This has to hamper their out plan as JDSU is the CSCO of acquisitions. Can component companies make it in an IPO with a limited product line?? and if not who will step up to challenge the dominance of JDSU via acquiring companies? Maybe Avanex,AFOP or OPLK
will take a bold step and merge with a tunable laser company and seperate themselves from the crowded passive field by adding actives to their offering. Time will Tell...
Titanic Optics 12/4/2012 | 8:29:15 PM
re: Inside JDSU's Secret Acquisitions >>So what does this mean for startups like Lightchip,Axsun,and Agility who have raised large sums of $$ and built up large staffs...This has to hamper their out plan as JDSU is the CSCO of acquisitions.<<

Well, for now it means that JDSU probably won't be paying for billion-dollar plus acquisitions. But, six months from now, when the 500+ start-ups out there spend down their money, a few will be caught prior to product acceptance but post-research phase. No matter how good an idea or product is, if it is too far ahead of its time, it may not see the necessary sales and lead to a cash crunch. So, these companies would need to seek "strategic alternatives", and then JDSU wouldn't have to pay $1B, they could get the company at a fire-sale price. (My comments are not specific to any of the firms you mention, I'm referring to a general, hypothetical case.)

optodunce 12/4/2012 | 8:28:54 PM
re: Inside JDSU's Secret Acquisitions A very good and concise evaluation of the climate and intent of some of the players today...titanic has it right!
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