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JDSU Picks Up Picolight for $115M

Craig Matsumoto
2/27/2007

Picolight Corp. , a survivor of the telecom crash, is getting acquired by JDSU (Nasdaq: JDSU; Toronto: JDU), a deal that helps shore up JDSU's datacom plans while giving Picolight a haven after surviving the telecom crash.

The deal, expected to close before July, has JDSU paying $115 million in stock and, depending on Picolight's revenues, up to $10 million in cash.

Picolight raised just more than $100 million since its birth in 1995, which predates the dotcom bubble. Its sixth and most recent funding round came in two pieces in 2005, totaling $27.5 million. (See Picolight Picks Up $13M and PicoLight Raises $27.5M .)

The deal brings JDSU further into datacom transceivers, pitting it more against Avago Technologies Pte. and Finisar Corp. (Nasdaq: FNSR). Those two companies lead the optical transceiver market on the strength of their datacom franchises, while JDSU has concentrated more on telecom.

Picolight did too, at first. Its plan was to bring the lower costs of Vertical Cavity Surface Emitting Lasers (VCSELs) into the optical module world. But as the telecom downturn lengthened, Picolight turned more to the datacom market, mining areas such as Fibre Channel modules. (See Picolight Preps Parallel Push and Picolight Adds to 4-Gig Arsenal.)

It's not as if Picolight represents any threat to the big datacom players. Analyst Jeff Osborne of CIBC World Markets pegs Picolight's annual revenues at $30 million to $50 million. Finisar's revenues for the past four quarters totaled roughly $389 million, and its market capitalization is around $1 billion.

Still, the deal comes at a time when sheer heft is a benefit to optics suppliers. JDSU has probably been losing market share on the datacom side as Cisco has trimmed its supplier list, Osborne writes in a note this morning.

On a side note, Picolight could also boost JDSU's 100-Gbit/s Ethernet plans. One of the options for short-reach 100-Gbit/s connections -- the type that would run box-to-box inside a central office -- is to use arrays of ten 10-Gbit/s VCSELs.

"They bring a unique combination of parallel optical technology and in-house VCSEL expertise," says Dhrupad Trivedi, general manager of JDSU's transmission modules business unit.

The other 100-Gbit/s option commonly mentioned is a set of four 25-Gbit/s lasers. VCSELs aren't yet equipped to do that, though. "In the long run, if there's a way to use VCSEL technology, we will look into that, but there are technical issues," Trivedi says.

JDSU stock was down 92 cents (5.6%) at $15.78 by early afternoon, on a day when pretty much all tech stocks were trading down.

— Craig Matsumoto, West Coast Editor, Light Reading

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Pete Baldwin
Pete Baldwin
12/5/2012 | 3:13:38 PM
re: JDSU Picks Up Picolight for $115M
I knew Picolight was old, but I'd forgotten it goes all the way back to 1995. They've got to be in the running for some sort of survivor's medal. I don't recall them beefing up immensely during the bubble... maybe that's part of what kept them afloat.
Mark Sebastyn
Mark Sebastyn
12/5/2012 | 3:13:35 PM
re: JDSU Picks Up Picolight for $115M
Craig:

This is a very interresting reversal for JDSU. My thoughts here.

http://www.nyquistcapital.com/...
DarkWriting
DarkWriting
12/5/2012 | 3:13:33 PM
re: JDSU Picks Up Picolight for $115M
This link is the first thing I've seen in the press that is even close to being accurate. IT'S THE VCSEL, STUPID! Local story says employees will stay in Colorado. Hogwash! JDSU already has much of the transceiver technology through their purchase of IBM's old group. Heads will roll.

DW
Steve0616
Steve0616
12/5/2012 | 3:13:32 PM
re: JDSU Picks Up Picolight for $115M
What was JDSU's purchase of E2O all about? Touted for the 1310nm vcsel and ability to muscle up to FNSR and Agilent in 2004. If they can't execute, there won't be any diffence this time, either.
Kix
Kix
12/5/2012 | 3:13:27 PM
re: JDSU Picks Up Picolight for $115M
The problem is that every time JDSU buys a company, the integration is very badly handled. No matter what JDSU says now, this is essentially a VCSEL fab that is being bought and any transceivers that Picolight have will be absorbed into the JDSU product line which is all assembled in Asia. The jobs in Colorado will go.
Mark Sebastyn
Mark Sebastyn
12/5/2012 | 3:13:25 PM
re: JDSU Picks Up Picolight for $115M
Steve - exactly.

1310nm VCSELs were not compelling until now. They provide a distinct edge at the power and cost targets demanded by SFP+.

Steve0616
Steve0616
12/5/2012 | 3:13:25 PM
re: JDSU Picks Up Picolight for $115M
Maybe those cost, performance, and power advantages of 1310nm VCSELs create a match made in heaven for the 10G SFP+s. Any chance others will step up efforts or bring back their lw VCSEL programs?
Steve0616
Steve0616
12/5/2012 | 3:13:25 PM
re: JDSU Picks Up Picolight for $115M
and how about 10Base LRM xfp's?
Steve0616
Steve0616
12/5/2012 | 3:13:23 PM
re: JDSU Picks Up Picolight for $115M
hmmmmm...maybe so, but was thinking about that interim solution trend from X2, XFP, SFP+....Does the Vitesse EDC chip you mentioned in your article break the cycle?
Mark Sebastyn
Mark Sebastyn
12/5/2012 | 3:13:23 PM
re: JDSU Picks Up Picolight for $115M
10G LRM XFPs are a meaningless product.
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