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Oclaro-Opnext merger to create new number two components vendor 

29 March 2012
 
Oclaro has announced its plan to merge with Opnext. The all-stock deal, valued at $177 million (€133 million), combines the fifth and sixth largest optical component players to create a company with revenues second only to Finisar. The deal is expected to be completed in the next 3-6 months.

"We have never been shy [of mergers and acquisitions] - we did Avanex and Bookham," said Yves LeMaitre, chief marketing officer for Oclaro. "We believe industry scale allows you to absorb certain fixed costs like fab infrastructure and the sales force."

Market research company Ovum says the motivation for the merger is to create a company that directly competes with Finisar. "It creates a stronger, vertically integrated company that starts at chips and goes all the way to the line card," said Daryl Inniss, practice leader, components, at Ovum. 
 
The deal expands Oclaro's transceiver portfolio, enhancing its offerings in telecom and strengthening its presence in datacom.  It also expands the customer base: Opnext supplies Juniper, Google and H-P, new customers for Oclaro.
 
The common products shared by the two firms are limited. For high-end products the overlap is mainly 100G coherent and tunable XFPs.  
 
Both companies have announced 100 Gbps 168-pin multi-source modules. But Oclaro makes the optical components for the modules – tunable lasers, lithium niobate modulators and integrated coherent transceivers, items that Opnext has to buy for its 100G coherent module, says Ovum's Inniss: "Opnext has built decent gross margins when you consider that a lot of the optics they don't own themselves." Oclaro's components will now be used within Opnext's modules. 
 
The expected savings resulting from the merger will be between $35M-45M (€26M-34M), while the restructuring and system integration costs will be $20M-$30M (€15M-23M).  The new company says it will keep all its five fabrication plants.
 
By Roy Rubenstein