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Optical components

TriQuint to Acquire Agere's Optics

Agere Systems (NYSE: AGR/A) dropped a bit of a bombshell this morning when it announced plans to sell a substantial portion of its optical components business to TriQuint Semiconductor Inc. (Nasdaq: TQNT) for $40 million in cash (see TriQuint Buys Agere's Opto Biz). The transaction is expected to close in January 2003, subject to approval.

The price tag is more sad evidence of how little the market for optical components is worth these days. Agere, which has been one of the top three players in the market for optical modules and components, announced back in August that it would either sell or close down its activity in this area in order to focus on the more lucrative business of advanced integrated circuits (see Lights Out for Agere's Opto Biz).

"Wow!" says Jay Liebowitz, president of consultantcy Liebowitz Strategies. "On the surface it definitely seems like TriQuint got a great deal."

He says that most folk were expecting a deal closer in size to Bookham Technology plc's (Nasdaq: BKHM; London: BHM) recent purchase of Nortel Networks Corp.'s (NYSE/Toronto: NT) optical components groups, which sold for a total consideration of $111.6 million (see Bookham Buys Nortel's Components Biz).

In the past, the sizes of Agere and Nortel's components businesses were roughly comparable. Indeed, some analysts placed Agere ahead in terms of past revenues, while some put Nortel in the lead, depending on how Nortel's internal sales were measured.

Liebowitz points out, however, that future revenues are more important to the acquiring companies than past performance. TriQuint is projecting that Agere's opto groups will contribute $50 million to $75 million to its revenues over the next fiscal year. Bookham, on the other hand, is expecting to bring in at least an extra $80 million over the next four quarters, from selling components back to Nortel alone.

Furthermore, the Agere sale involved only two sites -- manufacturing in Breinigsville, Pa., and assembly and test in Matamoros, Mexico -- while the Nortel sale involved multiple sites in both the U.S. and Europe. Around 300 Agere employees will transfer to TriQuint; the Nortel sale involved 1,300.

The TriQuint transaction excludes Agere's cable television transmission systems components business, for which the company will continue to seek a buyer.

TriQuint's executives are all cock-a-hoop. "I am delighted that we have been able to reach agreement with Agere to acquire this business," crowed Ralph G. Quinsey, TriQuint's president and CEO in a prepared statement. "It's a natural fit for TriQuint as we have been involved in the design and production of integrated circuits and products for the optical networking business for over 15 years, and it is a core part of our company."

Wall Street seems, so far, to consider it a good deal for each party. Both Agere's and TriQuint's stock climbed in morning trading.

"They [Agere] may not have got a great deal. But it speaks volumes about their ability to execute on what they said they were going to do," comments Liebowitz, noting that only two months had passed since Agere announced its intention to quit the optical business.

The acquisition news played a key part in Agere's earnings call, which took place this morning. For the fiscal year 2002, which ended on September 30, Agere reported an operating loss of $1.8 billion, compared to a $4.6 billion loss a year ago. This reduction was achieved on lower revenues of $2.2 billion for fiscal 2002, compared to revenues of $4.1 billion a year ago.

Thanks to the restructuring initiatives, Agere now expects to break even on revenues of $450 million at the end of 2003.

— Pauline Rigby, Senior Editor, Light Reading
www.lightreading.com
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ivehadit 12/4/2012 | 9:30:04 PM
re: TriQuint to Acquire Agere's Optics gea,
get with it! we're talking agere, not lucent.
gea 12/4/2012 | 9:30:04 PM
re: TriQuint to Acquire Agere's Optics Sure seems like Firesale prices. On the surface, it looks a lot like a price even stupid Lucent leadership wouldn't agree to, but had to in order to stay afloat.

I find it amazing that a division that will contribute between 50 to 75 million this year can get sold for $45 Million. Does this attest to just how incompetant Lucent's management is? (In other words, that they would be in a situation where they probably are forced to sell such an asset).
FiberGuy 12/4/2012 | 9:30:04 PM
re: TriQuint to Acquire Agere's Optics 1.) TriQuint? Am I the only one that thinks this is an odd aquisition? I guess it is the sign of the times.

2.) Why would they not buy the CATV components? That business is doing better than most... perhaps they have a buyer all lined up. Three come to mind: Harmonic, Arris, & Scientific Atlanta

I think only Arris fits the bill to buy that portion of the business as they are a well diversified company (electronics and optics) and have grown in the past through major purchases (such as Antec).

Just my free 2 cents...
FG
fusionboy 12/4/2012 | 9:30:03 PM
re: TriQuint to Acquire Agere's Optics "we're talking agere, not lucent"

'cause you put lipstick and a dress on a pig, don't mean it's not a pig!
gea 12/4/2012 | 9:30:03 PM
re: TriQuint to Acquire Agere's Optics Oops! Lost my mind there for a second. But the price still seems like Firesale to me.
Pauline Rigby 12/4/2012 | 9:30:02 PM
re: TriQuint to Acquire Agere's Optics It's TRIQUINT, not Vitesse
and AGERE, not Lucent

[email protected]
whyiswhy 12/4/2012 | 9:30:02 PM
re: TriQuint to Acquire Agere's Optics $40M is far less than the cost of the plant and product development costs (IP). Smart bottom feeding.

But: If Agere could not make a go of it, due mainly to negative cash flow, then it is hard to see how Vitesse can do it. In that sense, this is just like the BKHM/NT deal. New products, new management will be required: a major turn-around project. Not soon, not easy. Let's see.

-Whyiswhy
let-there-be-light 12/4/2012 | 9:30:01 PM
re: TriQuint to Acquire Agere's Optics (before you get on my case)...
yes, i know, I messed up the html tags again...
let-there-be-light 12/4/2012 | 9:30:01 PM
re: TriQuint to Acquire Agere's Optics It's TRIQUINT, not Vitesse
and AGERE, not Lucent
<\i>

It must feel nice to be able to correct others for a change!!

[email protected]
whyiswhy 12/4/2012 | 9:30:00 PM
re: TriQuint to Acquire Agere's Optics My bad. This is the second day in a row. TriQuint, right. Same comments though.

-Whyiswhy
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