Emcore Beefs Up
For $85 million, Emcore picks up Intel's tunable laser and tunable transponder businesses, as well as 300-pin transponders for 10-Gbit/s Ethernet and integrated tunable-laser assemblies.
The companies expect to close the deal during the first quarter of 2008.
Emcore shares closed up $2.26 (19.4%) to $13.90 each Tuesday.
Why? Because this would bring Emcore into the big leagues in telecom optics. Emcore has solid footing in cable TV devices, and it's gotten attention for its solar-power business. But the company's main transponder play was for the LX4 standard for 10-Gbit/s Ethernet, and it didn't have a tunable laser and transponder. Intel's business would help Emcore join the ranks of Bookham Inc. (Nasdaq: BKHM; London: BHM) and JDSU (Nasdaq: JDSU; Toronto: JDU).
"It turns them from a niche player into one of the majors," says analyst John Harmon of Needham & Co. .
Emcore did introduce a transceiver at OFC in March. (See Emcore Intros Transceiver.) But the Intel acquisition providers a faster and broader entrée into the market.
The business Emcore is buying isn't in the black, "but they said they could make it profitable," Harmon says. That's because Emcore doesn't have the kind of overhead that Intel does. Moreover, both companies use Fabrinet Co. Ltd. (NYSE:FN) as a manufacturer, which might give Emcore a way to combine some operations.
On Monday, Emcore reported fourth-quarter revenues of $47 million, with losses of $16.2 million, or 32 cents per share -- but the company says it's on track to mid-2008 profitability.
About 130 Intel employees are affected by the deal. Neither company has said how many will be hired by Emcore.
For Intel, the deal continues a selloff that has included optical-networking chips and its ATCA business. The moves began after CEO Paul Otellini underwent a 90-day corporate soul-searching last year, evaluating all corners of the Intel business. (See Intel Hands Off to Cortina, RadiSys, Intel Deal, and Will Intel Trash Telecom?)
Specifically, Intel has retreated from the optical-networking business it built as the telecom bubble was deflating. Intel picked up some transponder knowhow from LightLogic in 2001 and followed that up by buying laser vendor New Focus in 2002. (See Intel Scoops Up Chips, LightLogic Bulks Up Under Intel, and Intel Scoops Up New Focus Laser Unit.)
What's left of Intel's Optical Platform Division? Today's press release mentions an enterprise busines and says Intel is "exploring strategic alternatives" there -- hinting that it's on the block as well.
— Craig Matsumoto, West Coast Editor, Light Reading