JDS Fitel Inc. of Nepean, Ontario, Canada, and Uniphase Corp. have signed a merger agreement to combine their fiber optic component supply businesses into a single company called JDS Uniphase Corp. If regulators and shareholders approve, the deal will create a company with annual sales of $420 million, market value of $6.1 billion (US) and 3600 employees. According to Anthony R. Muller, Uniphase senior vice president and chief financial officer of JDS Uniphase, the new company will reduce time to market for system developers with more highly functional integrated components. JDS Fitel offers passive components such as wavelength division multiplexers, optical switches and isolators. Uniphase makes active products, including laser modules, modulators and transmitters. "It will be a major challenge to put the two [companies] together, but the cultures are very similar," Muller said. "We expect [JDS Uniphase] to keep growing and to be a billion-dollar company [in sales] very soon, which will present a whole range of challenges to manage that kind of growth." Competition has pushed component prices down, which has pressed manufacturers to integrate components. Bill Diamond, vice president of marketing at E-Tek Dynamics Inc. in San Jose, which also manufactures components, described the merger as a "very exciting and bold move." But he wondered whether the new firm would be "more than a photonics holding company." The challenge, he said, is to reduce costs while the company organizes itself. "I'm not convinced that this is a one-plus-one-equals-three deal," he said, and noted that at least for now, customers will not find a one-stop shop. JDS Fitel vice president Winfried Horsthuis agreed that integration will not be quick and easy but said the matchup involved little overlap. The rapid emergence of JDS Uniphase raises questions about where it is going. Both Horsthuis and Muller insisted that JDS Uniphase's niche is as a component maker, and that becoming a system developer is out of the question. "Merging doesn't bring us closer to being a system developer. It's not our intent or ability to become a system developer," Horsthuis said.