It appears the acquisition being planned for Iolon Inc. would take the tunable laser vendor out of the telecom market, sources say.

While the talk around Iolon hasn't settled on a specific buyer, the top bet is publicly-held Coherent Inc. (Nasdaq: COHR), which makes commercial and scientific lasers.

If that's true, then Coherent apparently has found a non-telecom application for Iolon's tunable lasers -- or possibly its tunable filters. (See Iolon Unveils Tunable Filters.)

With some kind of deal apparently imminent, Iolon has called for last-time orders from some of its customers, according to one competitor. (See Something's Up at Iolon.)

Coherent officials say they don't comment on merger matters. Iolon did not return a call; the company didn't answer previous questions about possible mergers.

Rumors of Iolon's exit have percolated through the industry for most of the year. Talk heated up this month when JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU) agreed to acquire Agility Communications Inc., a tunable laser vendor that grew up with Iolon during the bubble years. (See JDSU Tunes In Agility.)

A non-telecom suitor would make sense, considering most of the likely telecom bidders -- namely Avanex Corp. (Nasdaq: AVNX), Bookham Inc. (Nasdaq: BKHM; London: BHM), and JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU) -- already have tunable lasers and/or lack the financial strength to do much acquiring.

Iolon would be a drop in the bucket to Coherent, which has 2,218 employees according to a May SEC filing. As of 2003, Iolon had 41 employees, down from 80 the year before. (See Such Language!) For fiscal 2005, which ends this month, analysts estimate Coherent's revenues at $516 million, according to Reuters Research.

Coherent's most recent acquisition came in June with the pickup of German optics vendor TuiLaser AG, a supplier to scientific, medical, and industrial circles, for €22.5 million.

— Craig Matsumoto, Senior Editor, Light Reading