Fiber-Optic Giant Lumentum to Buy Oclaro: Stocks Soar and Industry Consolidates


It’s a bright day for fiber-optic shareholders as Lumentum Holdings (NASDAQ:LITE) announced this morning that it will purchase optical component firm Oclaro (NASDAQ:OCLR) for $1.7 billion USD in cash and stock. 

Oclaro, a producer of components for optical communications systems, saw its stocks rise +27.52% today, bringing prices to $10.01 at closing time. This brings the company’s stock to its highest value since June last year, and its current market cap to $1.69B. Oclaro’s technology is used to improve systems which rely on high-speed, bandwidth-intensive internet connections such as cloud computing and video streaming. That’s right; Oclaro plays a part in keeping your favorite Netflix series running smoothly. If you weren’t interested before, you probably are now.

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Similarly, Lumentum Holdings are one of those companies who are extremely common in a behind-the-scenes sort of way. They are specialists in optical technology from 3D Sensing used in gaming to submarine networks; the undersea cables that connect the world’s high-speed internet. They have a completely global outreach, stating that “virtually every communications network in the world – telecom, enterprise, or data center – depends on our optical components and modules.” In addition, their high-performance laser technology is integral in producing common products such as smartphones and cars.

So what does this mean for the fiber-optic industry, and for shareholders in other industry firms? By purchasing Oclaro, Lumentum is surely ensuring its further dominion over the laser and fiber-optic technology. Other optical technology stocks rose in response. Analysts are suggesting that this is in anticipation of further industry consolidation down the line. Acacia Communications (NASDAQ:ACIA) closed at $44.84, up +6.18%, while rival company Finisar Corporation (NASDAQ:FNSR) stock closed at $20.31, up +5.26%. Quoted in Reuters, Piper Jaffray analyst Troy Jensen added thattoo many companies are chasing the same customers” in the fiber-optics industry, and that consolidation is a good thing for investors.

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I am very pleased that two of the optical industry leaders, Oclaro and Lumentum, will join forces,” said Oclaro CEO Greg Dougherty. “Together, we will be an even stronger player in fiber optic components and modules for high-speed communications and a market leader in 3D sensing.” Meanwhile, Alan Lowe, President and CEO of Lumentum, said he was “delighted” with the deal. 

Further details of today’s deal reveal that Oclaro stockholders will be entitled to $5.60 in cash for each share of Oclaro held as well as 0.0636 of a share of Lumentum common stock. 

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