EMCORE sells VCSEL-based product lines to Sumitomo

EMCORE Corp. (NASDAQ: EMKR) and Sumitomo Electric Device Innovations USA, Inc. (SEDU) have announced an agreement through which SEDU will buy EMCORE’s VCSEL-based component and transceiver product lines from EMCORE for $17 million in cash, subject to closing adjustments.

EMCORE Corp. (NASDAQ: EMKR) and Sumitomo Electric Device Innovations USA, Inc. (SEDU) have announced an agreement through which SEDU will buy EMCORE’s VCSEL-based component and transceiver product lines for $17 million in cash, subject to closing adjustments. The assets include EMCORE’s parallel transceivers, active optical cables, and other VCSEL component product lines, targeting applications in data centers and local area networks.

EMCORE will retain its telecom and broadband fiber-optic products, including the tunable lasers, tunable XFPs, cable TV modules and transmitters, FTTx transceivers, indium phosphide (InP)-based lasers, photodiodes, and modulators, video transport and specialty photonics products.

The assets to be sold include fixed assets, inventory, and intellectual property for the VCSEL-based product lines within EMCORE's fiber optics business unit. These product lines include VCSEL and photodiode components. EMCORE acquired many of these assets from Intel in 2008 (see “EMCORE to acquire Intel's enterprise and storage assets, Intel Connects Cables business”).

EMCORE says the sale of the VCSEL product line will allow the company to focus its portfolio in areas of strong product differentiation. In fiscal year 2011, the VCSEL-based product lines contributed approximately 5% of the company’s overall revenue. Furthermore, this sale is expected to simplify the company’s operating structure, reduce fixed costs, and improve market focus. EMCORE maintains that its core competencies in compound semiconductor-based products and performance capabilities are unaffected, and remain the cornerstones of its fiber-optics business, addressing high-speed fiber optic transmission for telecom, broadband, and military and defense applications.

"The decision to sell the VCSEL-based product lines is strategic and market driven," stated Dr. Hong Hou, EMCORE's chief executive officer. "Our product and technology portfolio is strongly aligned to support current and future requirements in tunable, coherent high-speed transmission systems and next-generation broadband architectures. The proceeds from the transaction significantly improve our balance sheet and the sale is expected to reduce the time to reaching profitability. Along with the improved operating model, the transaction will benefit our customers as we focus our investment in telecom, broadband and specialty photonics products to remain industry leaders in those respective product lines in our fiber optic business segment."

For its part, SEDU sees a variety of applications for the assets, including rack-to-rack, ganged serial links, logic-logic data links, board-to-board, and shelf-to-shelf requirements. Future developments will focus on consumer and automotive markets as well, SEDU suggests.

“SEDU is committed to developing the products necessary to meet the requirements of high-bandwidth, high-speed optical networks,” said John Wyatt, president and CEO of SEDU. "By acquiring EMCORE’s next-generation VCSELs and parallel optics products and technology, we will continue to advance high-performance computing applications and demonstrate the quality and reliability our customers have come to expect."

SEDU says it will continue the VCSEL fab operations in Albuquerque, NM, but consolidate the enterprise engineering team currently residing in Newark, CA, to its operations in San Jose.

On or prior to the closing, SEDU will enter into several ancillary agreements with EMCORE, including transition service agreements. The deal is subject to certain closing conditions including US Government approval such as regulatory approval by the Committee on Foreign Investment in the United States (CFIUS).

For more information on optical transceivers and suppliers, visit the Lightwave Buyers Guide.

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