BREAKFAST WITH THE FOOL
Monday, November 15, 1999
"Treat employees like partners, and they act like partners."
-- Fred Allen
Corning Scooping up Oak Industries
Richard McCaffery (TMF Gibson)
Telecommunications equipment and advanced materials manufacturer Corning (NYSE: GLW) reached agreement yesterday to buy network communications component maker Oak Industries (NYSE: OAK) for about $1.8 billion in stock, a 51% premium over Oak's closing price of $49.75 on Friday.
The deal, expected to close in the first quarter of next year, expands Corning's suite of fiber optic and photonic products, especially through the addition of Oak's Lasertron subsidiary, which manufacturers vital optical amplifier components. Lasertron's pump lasers increase the power of light signals in a fiber optic network, which in turn increases the capacity of the network.
The acquisition is part of a push by Corning, one of the world's leading fiber optic cable manufacturers, to offer telecommunications companies a full line of optical communications products, including fiber, cable, and hardware.
Increasingly, telecommunications equipment makers are expanding product lines in an effort to supply original equipment manufacturers, companies like Lucent (NYSE: LU) and Nortel (NYSE: NT), with more complete solutions.
Just selling fiber optic cable isn't enough. For instance, optical fiber and cable sales at Corning decreased significantly last year as prices declined, especially internationally. This offset rapid growth at Corning's photonic technologies, hardware, and equipment businesses. The Oak acquisition should help boost profitability by further distinguishing Corning's product line.
Rivals such as fiber optic component manufacturer JDS Uniphase (Nasdaq: JDSU) have a similar strategy, particularly when it comes to integrating components for customers. On November 4 JDS reached an agreement with longtime partner Optical Coating Laboratory (Nasdaq: OCLI) to merge the companies in a stock deal worth $2.8 billion.
The components JDS makes -- gadgets like transmitters, couplers, semiconductor lasers, and multiplexors -- are the building blocks of fiber optic networks, and demand for these networks is exploding as the Internet grows. Optical Coating makes optical thin film coatings and components, products that control the way light moves in fiber optic strands.
Under terms of the Corning/Oak agreement, Corning will exchange 0.83 shares of common stock for each share of Oak common stock. The deal will be accounted for as a pooling of interest and will be tax free to Oak shareholders.
News to Go
Media and entertainment company Disney (NYSE: DIS) has been ordered by a U.S. District Court judge to stop using its Go.com logo because it's too much like the one used by GoTo.com, an Internet search engine service.
German mobile phone company Mannesmann AG yesterday rejected a $106 billion takeover offer from Vodafone AirTouch (NYSE: VOD), the world's largest mobile phone company.
Financial data and business information service firm Data Broadcasting Corp. (Nasdaq: DBCC) is merging with the specialist asset valuation business of The Financial Times group, part of global media company Pearson PLC. This gives The Financial Times group a 32% stake in MarketWatch.com (Nasdaq: MKTW).
Online brokerage firm Charles Schwab (NYSE: SCH) is forming a partnership with Ameritrade Holding Corp. (Nasdaq: AMTD) and TD Waterhouse (NYSE: TWE) to create an online investment bank that will offer more shares of initial public offerings to individual investors, Bloomberg reported.
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