IPG Photonics to enter optical pluggable module market with Menara Networks acquisition

IPG Photonics Corp. (NASDAQ:IPGP), which has specialized in high-power fiber lasers and amplifiers, plans to enter the optical pluggable module market with the acquisition of smart optical transceiver vendor Menara Networks, Inc. IPG will pay $46.8 million in cash for Menara, subject to closing adjustments. The company expects the deal to close this quarter.

Menara initially made a name for itself by offering an optical transceiver with integrated Optical Transport Network (OTN) functionality (see "Menara Networks debuts 'OTN in a transceiver'"). Other "system in a module" products followed, including 100-Gbps optical modules (see "Menara Networks shipping direct detect 100G CFP optical transceivers for metro, data center interconnect"). The company's products have found their way into the networks of cable multi-system operators (MSOs), carriers, and data centers in North America and in networks elsewhere around the world.

The acquisition announcement comes after the two companies announced a partnership to address data center interconnect requirements via optical transceivers that operators could plug directly into their data switches and routers (see "Menara Networks, IPG Photonics partner for 100G DWDM metro, data center interconnect applications").

In addition to the modules, the acquisition will bring IPG mixed-signal ASIC expertise.

"The acquisition of Menara Networks is in line with our strategy to make bolt-on acquisitions that provide us with the talent, technology and products to enter large complementary markets," said Dr. Valentin Gapontsev, IPG Photonics' chairman and CEO. "Since IPG was founded in the 1990s, telecom products have been a staple offering for IPG, part of our DNA. This acquisition broadens and complements our telecommunications offerings and provides significant sales synergies. Together, we can offer our customers an expanded telecom technology platform with more integrated products with superior performance and economics. The acquisition also affords IPG a better position to capitalize on the robust growth of optical networking driven by video and broadband access."

Privately held Menara Networks earned revenues of approximately $21 million in 2015 and is profitable, IPG says. IPG management expects the acquisition to prove accretive to earnings in 2018, but initially will have a dilutive effect of approximately $0.01 per share each quarter. The deal would be immediately accretive were it not foracquisition and retention-related expenses, the company adds. Speaking of retention, Menara's management team, including co-founders Siraj Nour El-Ahmadi and Salam Elahmadi as well as other employees, are expect to remain with the combined company.

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