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JDS Buys Acterna for $760M

Optical networking manufacturer JDS Uniphase announced the $760 million cash-and-stock purchase of telco test vendor Acterna Monday.

The deal will round out JDS' hardware portolio, adding a test and measurement component to its line of telecommunications and optical networking gear. Acterna provides test and measurement (T&M) systems to telephone and cable companies, as well as network equipment vendors.

"By strengthening our existing product portfolio with Acterna's instrumentation services and systems portfolio, JDS will be better equipped to meet customer requirements for highly-integrated portfolios," Kevin Kennedy, JDS president and CEO, said during a press conference Monday.

The deal is valued at $760 million, with $450 million coming in cash and the rest in common stock, subject to adjustments, officials said.

According to Kennedy, the acquisition doubles its market presence in the communications arena into the T&M space, which he said is a $2.6 billion market with a 5 percent to 10 percent cumulative annual growth rate.

The deal is expected to close in the quarter ending in September, subject to regulatory approval and other closing conditions. When it closes, Acterna will become the JDS Uniphase Communications T&M product group, led by Acterna CEO and President John Peeler.

Job losses as a result of the merger are expected to be light, though expected synergies between the two companies will reduce some of the current 1,770 Acterna employees. Much of the manufacturing done at Acterna is already outsourced to lower-cost facilities around the world, with existing employees providing the final assembly and tests, Peeler said.

JDS is currently in the middle of a multi-quarter business transformation project, started last month, to cut costs and expand its profitability. The announcement was immediately followed up with the company moving the manufacturing of two of its U.S. plants to Shenzhen, China and two other contract manufacturing partners, as well as reducing operations at a third plant. The moves reduced the company's North American operations by 15 percent.

It was part of the company's recovery process after the dot-com bubble burst in the late 1990s, affecting operations at many U.S. companies well into the new century. Kennedy stepped into his role after JDS' co-founder, Jozef Straus, exited in the wake of significant losses, mainly big-ticket acquisitions that devalued after the bubble burst.

Today's announcement is part of the business transformation and recovery, Kennedy said, providing a quick burst to profit growth.

"The acquisition of Acterna is another important step which we expect will accelerate that path in addition to diversifying our customer base, speeding time to revenue and improving our visibility into end markets," he said.