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How Emcore bagged an Intel bargain

One industry analyst reckons that Emcore picked up the enterprise portion of Intel's optical module business for a bargain basement price because nobody else wanted it.

In the second acquisition, which was completed this week, Emcore picked up intellectual property, inventory, fixed assets and technology relating to optical transceivers for enterprise and storage networking customers, as well as the Intel Connects Cables (ICC) interconnects for high-performance computing clusters.

These components will enhance Emcore s presence in datacom and storage area networking, while also giving the vendor access to emerging markets for active optical cables — enclosed fiber-optic cables with electrical interfaces.

"Emcore expects the Intel Connects Cables business to have gross margins exceeding 50 per cent and to be the fastest growing segment of the acquired assets," commented Reuben Richards, Emcore executive chairman.

Sounds good. But according to one analyst, Emcore initially passed on the deal. "Because of an overlap with its product lines, Emcore had initially declined to pick up Intel s X2, XFP, SFP and SFP+ modules," said Jag Bolaria, senior analyst with The Linley Group. "Finding no other suitors, however, Intel came back with a sweet deal that Emcore could not refuse: a $25 million price tag for a business expected to generate $45 million in revenue over the next 12 months."

However, the fact that nobody else wanted Intel s enterprise module business probably says less about Intel and more about the reluctance of components vendors to indulge in any M&A activity.

This move completes Intel s fire-sale exit from the optical communications market, allowing it to focus on its core business of microprocessors.

Earlier this month Emcore confirmed its intention to separate the fiber-optics and photovoltaics business units, by authorizing the preparation of an operational and strategic plan.

• Story courtesy of fibersystems.org.

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