& cplSiteName &

Optical Exits

Craig Matsumoto

6:00 PM -- Oclaro Inc. (Nasdaq: OCLR) CEO Alain Couder says he got approached by six smaller-company CEOs during OFC/NFOEC. Oclaro had just picked up Xtellus at the time. (See Why Oclaro Picked Xtellus.)

That's not all that new, but then again, it seems the promise of 100 Gbit/s has kicked extra kinetic energy into the deal search. The announcement of Cisco Systems Inc. (Nasdaq: CSCO) buying CoreOptics Inc. should generate even more steam.

Couder makes the easy prediction that more deals will be happening -- easy, considering that despite the steady, low-level flow of deals, there's still a generation of components companies waiting for their chances. "Many of the venture capitalists that have been invested in these companies are seven or eight years into them, so they need an exit," he says.

The other exit is to go public, of course, but most components companies are too focused on a specific product to be good IPO fodder -- CoreOptics being a prime example.

Santur Corp. wanted to give it a shot a long time ago. (See Santur Raises $26.5M, Talks IPO.) Apparently, it's no fun. From a discussion we had in March, here's what CEO Paul Meissner had to say about his experience on IPO tours:

"Most people say, 'We buy stocks in this industry to trade them, not in order to hold them.' They don't see the inherent value in the industry; they see things going up and down... We need investors. They've got to believe in this, and if their view of the industry is that it's profitless prosperity, we're not going to get those investors."

Even so, O-Net Communications (ShenZhen) Ltd. went public in Hong Kong, and NeoPhotonics Corp. (NYSE: NPTN) wants to try in the US. (See Optical Firm Preps Hong Kong IPO and NeoPhotonics Readies Its IPO.) It's going to be interesting to see if they can overcome that "profitless prosperity" problem.

— Craig Matsumoto, West Coast Editor, Light Reading

(5)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Pete Baldwin
Pete Baldwin
12/5/2012 | 4:34:26 PM
re: Optical Exits

Dividends?  They can do that?


12/5/2012 | 4:34:26 PM
re: Optical Exits

About two years ago, I wrote this:

4. Profits and quality of profits will start to dominate financials.

Now, "profitless prosperity" is oxymoronic, but the IPO flippers are one step away from recognizing that there's nobody left to purchase crappy shares after the lockup.  That's a healthy thing, imho, because then they will start looking for honest-to-god cash flow and even (heaven forefend!) dividends.

Pete Baldwin
Pete Baldwin
12/5/2012 | 4:34:25 PM
re: Optical Exits

More seriously: I appreciated that post from a couple of years ago, and it was worth a re-read.  Unprofitable or barely-profitable optical companies seem like a tough item to sell to investors.

12/5/2012 | 4:34:24 PM
re: Optical Exits

There were a lot of good comments in that thread.

BTW:  That article puts opnext's purchase of Stratalight at $172M, 30 of which was cash.  Opnext's stock price was about 5.30 when that deal was done, and about 2.15 when Coreoptics was done.  (from Yahoo's interactive graph, numbers are rough). 

So adjusting for the stock price, stratalight was $30M + ($142M * 2.15/5.30)  or about $87M, near the coreoptics number.  (God I hope the stratalight guys got out of opxt stock.)

12/5/2012 | 4:34:21 PM
re: Optical Exits

It a tough sell even to insiders!

More Blogs from Craig's A-List
If there isn't a master plan behind Google's creation of Kubernetes, maybe there ought to be.
Already replaced as CEO, John Chambers is fully detaching as he plans to step down as Cisco chairman, truly ending his time as the face and voice of the company.
The network must be automated. And Light Reading must write about it.
Comcast joins Google in asking for a flexible-rate optical standard, rather than 400G or terabit, but that's easier said than done
Cisco, Juniper and other more traditional Interop speakers might get overshadowed by the forces of virtualization
Featured Video
Upcoming Live Events
November 5, 2019, London, England
November 7, 2019, London, UK
November 14, 2019, Maritim Hotel, Berlin
December 3-5, 2019, Vienna, Austria
December 3, 2019, New York, New York
March 16-18, 2020, Embassy Suites, Denver, Colorado
May 18-20, 2020, Irving Convention Center, Dallas, TX
All Upcoming Live Events