Lucent Technologies is set to spin off its microelectronics business, in a move that will create a $4 billion company.
Lucent will focus its remaining operations on the networking industry, while allowing the microelectronics business to compete better in the market.
Lucent has already announced the spin off of it’s Enterprise Networking Group, under the Avaya banner, which is due later this year.
Lucent said that because the microelectronics group does 75% of its business outside of Lucent, often with it’s competitor OEMs, it was decided that it could perform better outside of the fold.
Accelerate Growth
“This new company will be able to accelerate its growth now that it’s free from this strategic conflict,” said Richard McGinn, chairman and chief executive of Lucent.
“This move will unleash the shareholder value of our microelectronics business, whose success will now be more fully recognized outside of Lucent’s larger communications networking systems business.”
The new microelectronics company will combine Lucent’s optoelectronics and communications ICs operations.
Lucent believes that the combination of electrical and optical technologies will position the new company to take a lead as the only pure play communications semiconductor company in existence.
Currently the optoelectronics unit is one of the fastest growing units within Lucent, growing more than 80% last year, and many analysts were surprised at the decision to combine it with communications IC rather than spin off two separate units.
Increased Sales
Sales of optoelectronic components are set to rise to $2.5 billion this year, from $1.5 billion last year, according to Lucent.
“Assuming that Lucent’s optoelectronics business enjoys margins roughly comparable to those of JDS Uniphase [the current largest optoelectronics components supplier], we believe that Lucent’s optoelectronics business could trade at a roughly comparable multiple, which would yield a valuation well in excess of $50 billion,” said Paul Silverstein, and analyst with Robertson Stephens.
