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JDS Fitel, Uniphase Complete Match Made in Fiber Optics

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Robert C. Pini

Call it a done deal. At the end of June, shareholders of Uniphase Corp. and JDS Fitel Inc. of Nepean, Ontario, Canada, gave overwhelming approval to the companies' merger plans.

That was hardly surprising considering that the share price of Uniphase stock, listed at $80.75 (US) when the merger was announced Jan. 28, had risen to $168.94 when the vote was taken. JDS shares similarly doubled in the five-month period, going from $67.50 (Canadian; or about $46.13 US) to $125 (or about $85.43 US).

The new company, JDS Uniphase Corp., is an odd fish in the world of mergers and acquisitions. Numerous headline mergers achieve cost savings for companies that compete with the same product for customers in mature markets. This one brings together two firms with the same customer base but different products. "Our only overlap is in fiber Bragg gratings, and neither one of us can build enough," said Anthony R. Muller, senior vice president and chief financial officer of the new company.

More products, faster

By combining their product lines -- active components, such as lasers and transmitters, with passive components, such as wavelength division multiplexers and optical switches -- they will be able to offer integrated modules. Instead of downsizing, the new company expects to be hiring to meet booming demand for its telecommunications products.

Reduced time to market is the cornerstone of the merger, Muller said -- an important benefit because a rapid flow of new products underpins success in the optical communications industry. With a market capitalization of about $13.66 billion, JDS Uniphase will be in a good position to develop new products. He said it expects to fund research and development to the tune of 8 to 9 percent of its $625 million combined annual revenues, a figure based on 1999 first-quarter earnings.

Muller declined to talk specifically about new products, markets or other mergers on the horizon. "We look at new markets," he said. "But we have a challenge to serve the markets we are in now. ... We expect to continue with [acquisitions] that help to increase market share."

Incorporated in Delaware, JDS Uniphase will operate headquarters in San Jose and Ottawa. It will trade on the Nasdaq (JDSU) and on the Toronto Stock Exchange (JDU). The company has manufacturing facilities in several countries, each one focused on specific products, and Muller said it expects to add operations to build integrated modules.
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Published: August 1999
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