Struggling networking gear maker Opnext Inc. [
OPXT] has
purchased venture capital-backed StrataLight Communications Inc. in a cash-and-stock deal valued at $172 million. Under the deal Opnext is paying 26.55 million shares and $30 million in cash. Based on Opnext's closing share price on Wednesday close of $5.27, the deal is worth closer to $169.9 million. Once the deal closes, StrataLight shareholders will own nearly 29% of the combined company.
StrataLight is backed by Comcast Interactive Capital, ComVentures (now merged with Velocity Interactive Group), Entrepia Ventures, Intel Capital, The Photonics Fund, TL Ventures, USVP and by several undislcosed strategic investors.
StrataLight makes 40-gigabit-per-second optical transport subsystems used in the communications industry. The buyer expects to bolster its presence in 40G as well as emerging 100G applications.
Opnext went
public in February 2007, raising $253 million after pricing its shares at $15 apiece. Spun out of Hitachi Ltd.'s fiber-optic components business at the height of the tech bubble, the company had raised a bundle in venture money, including a whopping $321 million investment from Clarity Group in August 2001.
As part of the deal, Opnext got access to Hitachi's R&D
laboratories in Tokyo. It also got a seasoned management team. That helped the company survive the ensuing downturn that ravaged the telecom sector.
But while Opnext flourished for several years amid surging demand for networking gear, its shares and revenues have flagged. Today, although it has sought to expand its business, the company remains frighteningly dependent on Cisco Systems Inc. [
CSCO] for sales, drawing nearly 46% of its revenue from the industry titan.
To compete in the telecom gear business today enterprises must operate either as nimble, low-burn startups working on the technological edge or as massive global players. The middle is death. Opnext's stock has recovered of late, but long term this is a company crying out to be consolidated.
-- Alain SherterSee July 9 press release on StrataLight purchase from Opnext
See 2002 interview with Opnext CEO Harry Bosco from Corporate Dealmaker
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