Confident Oclaro, Opnext savor future

One anticipates the participants in any announced merger will publicly express confidence in the results of the deal. But when it comes to the recently announced Oclaro and Opnext merger, such anticipation might be exceeded.

Speaking to Lightwave on March 27, the day after the merger agreement was announced, Yves Le Maitre, chief commercial officer at Oclaro, and Mike Chan, executive vice president, business development and marketing at Opnext, described their high expectations for the combined companies, as well as how the deal came together.

The two firms share similar corporate cultures and will soon share complementary product lines, both Le Maitre and Chan asserted. These factors will smooth integration of the two companies – an opinion Le Maitre said his company bases on its experience combining the former Bookham and Avanex to create Oclaro.

“The type of integration and the type of challenges we faced then we feel are very similar to what we will have to face here with the merger of Oclaro and Opnext,” he said. “And we believe it’s going to be a very similar transformation of the industry through this merger.”

That transformation will rest on the fact that the combined companies will now be able to address both telecom and datacom markets (the latter a new experience for Oclaro) with a wide range of component and subsystem products. In many cases, there is opportunity to create new avenues of vertical integration, particularly using Oclaro components to populate Opnext modules.

This integration will prove particularly fruitful for 40- and 100-Gbps applications, which Le Maitre asserted is the fast-growing segment of the market. “I think that in 40 and 100 gig, we’ll be the player in the market,” he stated.

However, the coherent 100-Gbps module space is one of the few areas where the companies’ product lines overlap. Opnext demonstrated both 100-Gbp coherent modules and line cards last month at OFC/NFOEC. Meanwhile, Oclaro has touted its MI 8000XM module for similar applications. Opnext is already shipping samples of its technology, while Oclaro sources have said their offering is on schedule for shipments in the first half of this year.

Asked how this overlap will be resolved, Le Maitre said that the two companies will continue to compete against each other until the merger is complete – a milestone the two companies hope will be reached by this July. Le Maitre said the two firms will set up a transition team in the meantime to determine how best to proceed with integration, including how to address 100-Gbps modules.

In addition to the telecom and datacom markets, the two companies also will combine their work in industrial and consumer markets, a business line Chan said was worth around $100 million.

For these reasons, the two companies have eyed each other for some time as part of the respective expansion strategies. “We had identified Opnext as a key potential merger partner for us, because we had always felt that from a technology standpoint, from a product standpoint, there was a very nice, complementary set of products and technologies – and customers,” said Le Maitre.

“Yves and I have been talking since at least 2008, 2009,” agreed Chan.

Once the transaction completes, the resulting company will jump to second place in the race for optical component and subsystem market share. Hitachi, Opnext’s parent company whose expertise and access to systems engineers Opnext has leveraged throughout its history, should come along for the ride. “We don’t expect any change in that relationship,” Chan said. “The anticipation is that the R&D relationship will continue.”

As will relationships with other systems houses. “I tell you, through this combination we’re going to have a strategic relationship with all the key players in the DWDM space,” Le Maitre asserted. “They’re going to be looking at us, they’re going to be sharing their roadmaps with us, and they’re going to be working with us in the future. So we certainly will not lack access. The question for us will be more about which bets do we place and which technology investments do we make.”