Mergers & acquisitions

Oplink Is on the Prowl

DALLAS -- NFOEC -- In the wake of its failed merger with Avanex Corp. (Nasdaq: AVNX), Oplink Communications Inc. (Nasdaq: OPLK) is emerging as a potential consolidator for the industry.

The company believes it needs to expand its technology base to stay competitive. "We always watch our cash burn," says CEO Fred Fromm in an interview with Light Reading here at the NFOEC show. "Our second priority is to add new technology."

Adding new technology was the prime purpose of the proposed merger with Avanex, which fell through because Oplink's Taiwanese shareholders rejected the deal (see Avanex and Oplink: Wedding's Off).

A top priority for Oplink is to partner or purchase active optical component technology. "We see a trend towards more and more subsystems," says Fromm. "The market is now more about adding channels and capacity than it is about new systems. That means actives." Another area it wants to expand into is planar passives, such as Arrayed Waveguide Gratings (AWGs).

Fromm adds that competition from homegrown Chinese and Taiwanese component startups is forcing Oplink to move up the value chain to make more highly integrated components (see US to China: Do You Copy?). "When a component becomes commoditized, we stop doing it."

Going forward, Oplink will seek to purchase smaller outfits, rather than trying to buy or merge with larger companies, according to Fromm. Large component vendors like Agere Systems (NYSE: AGR) may be cheap to buy, but they are very expensive to own, he contends.

Oplink's ideal purchase would be a company with a technology that needs to be moved into manufacturing. Oplink would step in, buy the technological assets and the technical staff, and move the manufacturing over to its low-cost facilities in China. Sales, manufacturing, and administration would be absorbed into the parent company.

Oplink has $225 million of cash in the bank and a burn rate of less than $5 million a quarter, according to Fromm, placing the company in a strong position to make the kind of deals he is talking about.

Fromm won't say if any deals are currently on the table. "We are actively seeking and cautiously acting on what we find."

— Pauline Rigby, Senior Editor, Light Reading
OpticKnowledge 12/4/2012 | 9:45:18 PM
re: Oplink Is on the Prowl If Oplink is looking for active components companies for possible purchasing? Have they thought of tunable laser technology companies?(i.e.- Iolon, agility, santec?)
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