What a difference two years makes:
MEMSCAP to buy former Cronos for $10M

Aug. 2, 2002 — France-based MEMSCAP said Thursday it will buy JDS Uniphase’s MEMS Business Unit in a stock deal valued at about $10 million – the very same unit JDSU acquired in 2000 for stock worth $750 million.

 

MEMSCAP, which offers MEMS products and services for telecommunications, biotechnology and other fields, said it will issue 10.5 million shares to JDSU at closing, and possibly 6.5 million more over a 2 ½ year period if specific revenue targets are met. The acquisition, scheduled to close within 60 days, is subject to approvals by MEMSCAP shareholders and stock market regulatory authorities, as well as by an independent French appraiser.

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JDSU’s MEMS unit, formerly Cronos Integrated Microsystems, was acquired by JDSU in 2000 from MCNC, a North Carolina research center that created Cronos in 1993 and spun it off as a stand-alone business six years later. The unit focuses on 2-by-2 switches and attenuators that function in a variety of optical networks.

 

At least half of the unit’s 80 employees are expected to get pink slips, as machinery is moved from North Carolina to Bernin, France, to centralize production of large wafer optical components.

 

Jesko von Windheim, vice president and general manager of the MEMS unit, said he wished the small tech group could have succeeded in breaking out of the telecom drought. But despite the huge drop in share price, he said the planned acquisition proves the worth of the business.

 

“If you’re looking at it from the perspective of people being laid off, of course that’s difficult, but the business entity continues to flourish,” he said. “A lot of our peers are shutting down, but there’s still value in this business unit.

 

“If you look at the development of the business under the MEMSCAP umbrella, moving (the unit) back into a diverse business model is appropriate and correct for everyone concerned,” he said. “As a captive unit within JDSU, although we did some diverse work, the pressure to focus on optical is huge. When volumes don’t evolve as anticipated, it makes it more difficult.”

 

MEMSCAP officials said the new market value of the MEMS unit’s equipment alone is $35 million.

 

“This (acquisition) allows us to be able to do any kind of MEMS – and the biggest volume capacity in the world,” said Jean-Michel Karam, MEMSCAP’s president and chief executive officer. “If you look at the deal from all facets, it looks fantastic.”

 

The down side also is small, compared to some small tech firms.

Nanovation Technologies Inc., which made optical circuits for MEMS-based technology, went out of business in November after trying to reorganize under Chapter 11 bankruptcy protection. InLight Communications shut down the same month after failing to raise enough money to get its optical MEMS subsystems to market — despite raising $11.5 million in venture capital earlier in 2001.

Tom Breunig, a MEMSCAP spokesman, said the new MEMS group will keep its main plant and offices at MCNC, abandoning a spacious building it bought two years ago to keep pace with rising production demand that dropped with the economic downturn.

Still, Breunig said, MEMSCAP will consider expanding the staff and space if the market and sales improve in the next two years.

“We certainly want them to continue the good work they’ve been doing to date,” he said. “We don’t know how we plan to integrate at this point.”

MEMSCAP, which has its U.S. headquarters in San Jose, Calif., said JDSU’s MEMS unit gives them a heavy North American presence. JDSU will also buy products and services from MEMSCAP, and the deal provides the French firm with several active contracts and customers.

Marlene Bourne, a MEMS analyst for In-Stat/MDR, said it’s nice to see the advantages for the firms, but she is also pleased to see the deal doesn’t come at the expense of small tech.

“Even though JDSU is selling its MEMS unit … they’re not completely writing off the technology,” she said.

“It shows a real interesting maturing of this industry — MEMSCAP in a position that they can be acquiring other MEMS companies,” Bourne said.

MEMSCAP stock closed Friday on the Euronext exchange down (Euro)2 cents to 80 cents a share. JDSU closed Thursday at $2.25, down 28 cents from Wednesday’s close of $2.53.

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