Finisar Buys Into Optical AmplifiersFinisar Buys Into Optical Amplifiers

Finisar Corp. (Nasdaq: FNSR) said that it will get technology to power the next generation of optical amplifiers with a $23.7 million acquisition of Red-C Optical Networks Ltd. Under the terms of the deal, announced Tuesday morning, Finisar will pay an initial sum of $23.7 million in cash for Red-C. Finisar will also pay "stockholders and certain Red-C employees" up to $20 million extra if unspecified financial performance targets related to Red-C products during calendar year 2013 are achieved.

Red-C provides erbium-doped fiber amplifiers (EDFAs), Raman amplifiers and optical monitoring devices for long-haul, regional, metro and access networks. The company, which is incorporated in Delaware but has operations in Tel Aviv, has 140 employees.

The deal is expected to close by July 31.

Why this matters
This could help Finisar counter the vertical integration of JDSU (Nasdaq: JDSU; Toronto: JDU). One of JDSU's strengths is its ability to combine multiple line cards into one -- putting a ROADM together with an EDFA and optical channel monitors, for instance. (See OFC: JDSU & Superblade! and Finisar vs JDSU.)

"We generally view this acquisition as consistent with Finisar's strategy of vertical integration," writes analyst James Kisner at Jefferies & Co. Inc. in a note published Tuesday. "We expect this acquisition could make Finisar more competitive with JDSU in the ROADM line card space."

Red-C, which has been around since the dawn of Light Reading, also brings a long-haul amplifier business that Finisar doesn't have, along with some future prospects. Red-C thinks its Hybrid Raman-EDFA platform can replace plain EDFAs in future long-haul and ultra-long-haul networks.

— Dan Jones, Site Editor, Light Reading Mobile