Nortel Networks Corporation has announced it is selling much of its optical components business to Bookham Technology plc.
The deal involves cash and shares valued at an estimated $50 million.
According to expert commentary at Light Reading, an optical industry newsletter, it is better for Nortel to sell at rock bottom prices than to have to shed its staff and then deal with the legal and regulatory consequences.
Approximately 1,000 employees will have the opportunity to continue their employment with Bookham Technology after redundancies are addressed and existing customer contracts will be assumed by Bookham Technology.
The press announcement says that the deal involves the company's subsidiaries in the UK, Canada, and Zurich, Switzerland.
Third change of hands
This is the third time the Zurich pump laser business has changed hands. It started out as an IBM spinoff that was acquired by Uniphase Laser (which was later acquired JDS).
In the late nineties, Uniphase invested more than $20 million to construct the 6000-square-meter high-capacity diode laser factory in the Binz industrial district, where most of the employees assembled the pump laser diode components by hand.
Then in early 2001, Nortel Networks acquired the Swiss operation, along with some US sites, when JDS/Uniphase ran into financial difficulties. The Canadians paid about $3 billion based on the Nortel stock price at the time.
The future of the Zurich facilities relies on the demand for its pump lasers picking up. Experts say that inventories among its customers such as Nortel, Cisco will start to wane sometime next year, creating new demand.
Bookham is a new generation optical components manufacturer. Its strength is its ability to integrate bulky optics and separate components into a semiconductor platform that ultimately combines lasers, coupling, lenses and filters in a chip-sized package.
The transaction is expected to close in the fourth quarter of 2002. As a condition of the sale in Europe, all necessary employee consultation requirements must be satisfied.
The completion of the transaction is also subject to customary regulatory approvals and a vote by the shareholders of Bookham Technology.
Under the terms of the agreement, Nortel Networks will sell the transmitter and receiver business located in Paignton, U.K., Ottawa, Canada, and Harlow, U.K., and the pump laser and amplifiers business located in Paignton, U.K., Zurich, Switzerland, and Poughkeepsie, New York. The assets include patents, other intellectual property and trademarks.
The transaction also includes a 3-year supply agreement for minimum purchases of approximately $120 million for the first 18 months. Credit Suisse First Boston acted as financial advisor to Nortel Networks for this transaction.