Lucent expands optoelectronics business with Ortel acquisition

April 1, 2000


Lucent Technologies' (Murray Hill, NJ) microelectronics and communications unit grabbed a sizable piece of the market for cable-TV components with the acquisition of Ortel Corp. (Alhambra, CA), a deal expected to close in June. Ortel, a developer of optoelectronic components used in cable-TV networks, will be absorbed into Lucent at a cost of nearly $3 billion.

The acquisition signals that Lucent is expanding into yet another area of the optical- telecommunications marketplace. The company believes the cable-TV space offers another high-growth networking segment that fits nicely into its optoelectronics portfolio.

"The acquisition marries Lucent's communications optoelectronics leadership with Ortel's experience in optoelectronics for cable TV and positions us to support the converging needs of these markets," says Conrad Burke, director of marketing for optoelectronics components in Lucent's Microelectronics Group. "We expect this acquisition will fuel the momentum of our optoelectronics components business."

Ron Westfall, an analyst for Current Analysis Inc., a tele communications-industry analyst firm, says Lucent's actions show it aspires to be a major player in one more communications space-cable-access applications.

"Lucent had been a non-factor in the cable-access market thus far, even despite its kinship with AT&T," says Westfall. "The company needed to acquire technology that addresses this fast-growing space. The Ortel technology specifically enables cable-access infrastructures to transition from one-way broadcast formats to two-way interactive formats. The two-way interactive means of com munications is essential for enabling multimedia and interactive applications such as voice and digital broadcasting."

Lucent plans to create a one-stop shop for cable-TV network components that will be unmatched by other semiconductor suppliers. According to

Lucent, its optoelectronics business grew by 83% last year-more than double the industry average. However, Current Analysis believes it remains to be seen if the Ortel purchase will be a catalyst for grabbing substantial market share or merely a means for Lucent to dabble as one more niche player.

"Lucent needs to prove the $2.95 billion is money well spent," says Westfall. "Lucent has been perceived to overspend on some of its key acquisitions, as evidenced by the $24 billion spent on Ascend. Moreover, Lucent still lacks some of the key components needed to compete in the cable-access market in the long term, such as DOCSIS-compliant CMTS and routing systems and cable modems. Lucent risks being a niche player only in the cable-access market unless it acquires such technology as well."

Lucent, however, rarely settles for being a niche player, particularly when it comes to its optical technologies. John Dickson, executive vice president and CEO at the company's microelectronics and communications technologies unit, points out Lucent's leadership in many key markets in the communications optoelectronics space. He says the company is continuing to build leadership in four critical areas: systems, software, silicon, and services.

It should also be noted that Lucent has an advanced, highly automated manufacturing and packaging platform for optical components, enabling high-volume, low-cost production. Ortel's technologies will be incorporated into Lucent's manufacturing process, significantly increasing the output of new products under the Lucent brand name. Among the assets Ortel brings to Lucent is its 10-Gbit/sec transmitter/receiver components for use in optical-communications networks and 980-nm uncooled pump lasers, which Lucent intends to use in amplifiers for metropolitan fiber-optic network applications. Along with its Alhambra, CA, headquarters, Ortel also has international operations in Sweden, Germany, France, Singapore, and China. Ortel's 550 employees will remain at their current locations.