Nortel buys JDS Uniphase business

(Telephony) In yet another step to increase its component prowess, Nortel Networks moved today to purchase JDS Uniphase’s Zurich, Switzerland-based subsidiary and related assets in Poughkeepsie, N.Y.

Nortel will pay $2.5 billion in its common shares on closing and up to an estimated additional $500 million in its common shares after December 31, 2003, if it does not meet certain purchase commitments from JDS Uniphase by that date.

The acquisition is intended to secure Nortel a steady supply of 980nm pump laser chips, which provide the energy needed to amplify light in dense wave division multiplexing networks.

If the deal goes through, Nortel will secure one of the largest suppliers of the chips, while it frees up JDS Uniphase to merge with the other significant 980nm supplier, SDL, Inc. So far, JDS Uniphase and SDL had faced difficulty in gaining regulatory approval for their merger, but the Department of Justice today granted approval in light of the unit sell-off.

“We are excited about this acquisition, and it is a key strategic move for us,” said Greg Mumford, president of Optical Internet for Nortel. “We will reap many benefits [of the acquisition] going forward. [980nm pump lasers] are a key element to the deployment of the all-optical Internet, and this represents a tremendous value for our customers.”

The move echoes Nortel’s strategy of focusing on integrated high-growth components rather than discrete ones, according to Mumford. The deal is also intended to strengthen Nortel’s presence in Europe.

Nortel expects to uphold current customer contracts going forward and will operate the company as a wholly owned subsidiary of Nortel. The deal is expected to close in the first quarter of 2001, although it is subject to the closing of the JDS Uniphase-SDL merger.

Last year, Nortel acquired both CoreTek and Photonic Technologies as part of its component expansion plans.