Nortel Lands JDS Subsidiary

[Ottawa, ONTARIO] Nortel Networks’ aggressive race to create an all-optical
Internet was given an additional boost with this morning’s announcement that
the company is moving to acquire the Zurich-based subsidiary of optical
equipment manufacturer JDS Uniphase.

Nortel will also be picking up related
JDS assets in Poughkeepsie, New York. Under the agreement, Nortel will pay
$2.5-billion (U.S.) on closing, and up to $500-million (U.S.) in its common
shares after December 31, 2003, if the company fails to live up to specific
commitments to JDS Uniphase.

The Zurich company currently oversees the sale of 980 nanometer pump-laser
chips to a number of global optical component manufacturers. With this
acquisition, Nortel hopes to accelerate its ability to integrate this and
related technology into Nortel’s optical amplifier modules, which boost and
amplify light in dense wave division multiplexing (DWDM) networks.

“The acquisition will drive our goal of leading the industry evolution from
discrete optical components to high-growth, high-value optical modules that
will lead the future of the high-performance optical components market,”
said Clarence Chandran, chief operating officer of Nortel. “That is where the next opportunity
is — in the integration, manufacturing and packaging of components into
high-performance modules for volume, automated manufacturing. These
components and modules will be pervasive throughout the all-optical
Internet.”

For JDS, the sale might solve a potential antitrust problem. Last spring,
shortly after Josev Straus replaced Kevin Kalkhoven as the company’s chief executive officer,
JDS announced a proposed merger between the company and competitor SDL Inc. worth $41-billion (U.S.). U.S. regulators are still examining the deal, citing antitrust
concerns. The sale of the Zurich subsidiary might be just the thing to
eliminate those worries, since, according to industry watchers, the facility
presents the most apparent similarity between JDS and SDL.

The link between JDS and Nortel dates back to the days when Nortel was
still known as Northern Telecom. Straus, then a physics grad, worked for
Northern before branching out to form JDS Fitel, a fiber optics technology
developer that he founded along with several colleagues. In 1999, JDS Fitel
merged with California’s Uniphase Corp, forming JDS Uniphase.

This latest deal will see the JDS Zurich subsidiary become a wholly owned
subsidiary of Nortel, and is expected to close during the first quarter of
this year. The boards of directors for both companies have already approved
the acquisition.

“JDS Uniphase’s Zurich-based subsidiary will be a valuable and very
complementary addition to Nortel Networks’ current portfolio of optical
components and modules,” said Stephen Reilly, general manager of JDS’ Zurich
subsidiary. “We have a highly-talented group of engineers and manufacturing
employees here in Zurich and in Poughkeepsie, New York. We are pioneers in
this field and are excited about joining forces with the industry leader in
optical networking.”

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