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JDS to Stuff Own Stocking with IBM's Optical Unit

Ottawa's JDS Uniphase Corp., a leading purveyor of fiber optic communications products, lightened IBM Corp.'s load Wednesday when it agreed to buy the Armonk, N.Y.-based firm's fiber optic transceiver unit for a $340 million cash/stock combination.

The breakdown is such that JDS, who competes fiercely with fellow Canadian firm Nortel Networks and San Jose, Calif.'s Cisco Systems Inc. in sector for which analysts have high hopes, will pay IBM $100 million in cash for the Rochester, Minn-headquartered business.

With its competitive sights trained on Nortel and Cisco in a time when high-tech markets are flagging across the board, JDS Uniphase's thinking was to provide optical products beyond its existing telecommunications markets to growing data communications markets.

What it gains with Wednesday's acquisiton are IBM's optical data communications products, which include small form factor (SFF) transceivers and Gigabit Interface Converters (GBIC) for storage area networks (SAN) and local area networks (LAN) using optical Fibre Channel and Gigabit Ethernet protocols. Big Blue's products expand the JDS Uniphase transmission module product line from long haul telecommunications to very short reach carrier and enterprise applications. This, JDS, said, will result in the "industry's broadest optical transmission product line."

Jozef Straus, JDS Uniphase co-chairman, president and chief executive officer, applauded his firm's deal.

"With this unit's innovative packaging and strategic design capabilities, we believe we can offer enterprises the same value-added proposition for data communications as we do in telecommunications: improved network flexibility, capacity, reach, reliability and cost through advanced fiber optic components and modules."

The news is good for the firm, which is battling with equipment giants for a bigger piece of the fiber optic product pie. JDS said it expected lower sales in its third fiscal quarter, which could be 10 percent to 15 percent lower than second-quarter sales.

"The company believes that the March (third fiscal) quarter will represent the low point in sales for the current downturn, although the recovery rate is expected initially to be modest," JDS said in a statement earlier this month.

Closing of the transaction is subject to customary conditions, including the receipt of government approvals.