Verrillon Gets Active in PassivesVerrillon Gets Active in Passives
The company formerly known as IntelCore buys up ADC's passives division, moving along industry consolidation
November 4, 2002
As optical components divisions went up for sale this past summer, the obvious question was whether there would be enough buyers interested (see Components Overboard!). Judging by the whirlwind of acquisitions last month, there was no cause to worry.
Specialty-fiber vendor Verrillon Inc. purchased ADC Telecommunications Inc.'s (Nasdaq: ADCT) passive components division last week (see ADC Sells Photonics Biz), capping a month that saw TriQuint Semiconductor Inc. and Bookham Technology plc (Nasdaq: BKHM; London: BHM) swing deals for the optical components businesses of Agere Systems (NYSE: AGR/A) and Nortel Networks Corp., respectively (see TriQuint to Acquire Agere's Optics and Bookham Buys Nortel's Components Biz).
Terms of the Verrillion/ADC deal were not disclosed.
All this comes at a time when analysts are crying for consolidation (though Major League Baseball would call it "contraction") among components suppliers. Vital as the components may be, the market is too deflated to sustain this many vendors, analysts say.
"Our observation was that by the end of the year, some would shut down," says Joseph Wolf, analyst with UBS Warburg.
Wolf admits he's perplexed that Nortel and Agere's optical divisions even found buyers, and he doesn't believe those sales can help the optical components business get any healthier. "All you've done is change the name on the door," he says.
The Verrillon sale does create a bit of consolidation, as it appears to spell the end for Altitun AB's tunable laser business, which ADC acquired in 2000 (see ADC Scores a Coup on Tunable Lasers). ADC had announced in July that it would close Altitun's site in Sweden, moving tunable laser manufacturing to Minnesota (a.k.a. Sweden West). But in announcing the sale to Verrillon, ADC also announced it would be closing the Minnesota facility (see ADC Tunes Out).
Verrillon -- the former IntelCore (see IntelCore Becomes Verrillon) -- remains undaunted. "A significant portion of our revenue is not in the communications space," says Carter Houghton, director of marketing and business development, although he wouldn't give details about those ace-in-the-hole markets. "We believe that will be the case with [the acquired ADC products] as well."
Verrillon announced on Friday it will take control of ADC's Canberra, Australia, site -- a source of passive components such as splitters -- and its 55 employees. The site will become a subsidiary of Verrillon, doing business as AOFR, the name it had before being acquired by ADC in 1995.
In August, ADC had announced it was hoping to sell its components businesses by Oct. 31 (see ADC Selling Components Biz). Specialty-fiber vendor Verrillon decided to take the opportunity to dive into the optical components market, Houghton says.
Verrillon was a supplier to ADC already, providing the pigtail cabling that sticks out of optical modules as well as the fiber optics that go inside the modules. In fact, the ties go even deeper, as Verrillon's board includes former ADC CEO Bill Cadogan (see IntelCore Introduces Board).Verrillon saw a chance to move up in the food chain, becoming the only components vendor that can supply its own specialty fiber, Houghton says.
Of course, the merger also means that other component vendors become Verrillon's competition, but that's perfectly normal, Houghton says. "In this industry, that is very common. I used to work for Corning, and if you look at Corning in relation to its competitors, all of the people who supply one another compete with one another."
Judging by the deals this past month, suppliers and competitors remain plentiful out there.
— Craig Matsumoto, Senior Editor, Light Reading
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