Agere Systems Inc has sold its optoelectronics business that generated $1.2 billion of revenue last year for just $40 million in cash after the freeze on spending by carriers meant that the unit became a huge drain on the resources of the Allentown, Pennsylvania-based chipmaker.
Communications chip maker TriQuint Semiconductor Inc stepped in to buy the operation after Agere put it up for sale in August. Hillsboro, Oregon-based TriQuint said the purchase would make it one of the world’s leading suppliers of optical modules and components.
While acknowledging that the market had been under a lot of pressure over the past two years, TriQuint CEO Ralph Quinsey said the acquisition will position it for substantial revenue and profit growth when the market recovers. The enormity of the downturn can be seen from the fact that Agere’s optoelectronics revenue, $1.2bn in 2001, slumped to $192m in its last fiscal year, and Triquint believes it will record between $50m and $75m in 2003.
Nevertheless, TriQuint believes that the acquisition will start to add to its earnings by the fourth quarter of 2003. The only part of the business excluded from the deal is a unit that makes components for cable TV transmission systems and Agere is still looking for a buyer for this business.
Agere, whose share price has fallen from $6.30 to $0.83 in the past year, has been desperate to ditch its loss-making operations after a disastrous year when revenue almost halved (see separate story).
Agere’s optoelectronics components were geared to the long-haul sector, which has been hard hit by the downturn. When it put the unit up for sale, Agere quoted market research firm RHK as predicting that optoelectronics component revenue will decline from $7bn in 2000 to $2.3bn this year.
A number of players have quit the optoelectronics business, and earlier this month Bookham Technologies Plc announced plans to take over the bulk of Nortel Networks Corp’s optical components business in a $112m deal. Bookham had already acquired the optical components business of Marconi Plc. The latest deal leaves TriQuint and Bookham to battle it out behind market leader JDS Uniphase Corp.