Lumentum Snaps Up IPG Photonics Telecom Businesses

jigsaw-puzzle M&A concept

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On 15 August, IPG Photonics, a purveyor of high-power fiber lasers and amplifiers, and the optical components and systems firm Lumentum jointly announced the sale of IPG’s telecom transmission product lines to Lumentum in an all-cash deal. The transferred operations include the optical-networking company formerly known as Menara Networks—originally acquired by IPG in May 2016 for US$48.6 million—as well as a subsidiary in Brazil. The sale price of the units to Lumentum has not yet been disclosed.

IPG: Focusing on core competencies

IPG Photonics framed the deal as an opportunity to re-focus on its core operations in lasers for materials processing and similar applications, and move away from businesses in which building scale could prove difficult. In a press release, the company’s CEO, Eugene Scherbakov, said that IPG had made “good progress” in developing the underlying tech for its transmission business, but that “the ability to scale these product lines would require a step-up investment” that the company preferred to plow into its core markets.

Looking ahead, Scherbakov suggested, IPG will be focusing on opportunities to build presence in “substantial new markets and applications” where fiber lasers can elbow out existing technologies—both laser and non-laser—by boosting efficiency and productivity or enabling “technological breakthroughs” for its customers. The company also noted that the sale to Lumentum would likely pare R&D and operating expenses going forward, which could “help to offset some inflationary pressures” for the rest of the year.

Lumentum: Plugging into ASIC strength

Lumentum, meanwhile, hopes the acquisition of the IPG telecom operations will complement its existing telecom business with development strength in application-specific integrated circuits (ASICs) and coherent digital signal processors (DSPs) that the IPG operation brings to the table.

Tying those capabilities to Lumentum’s existing strength in silicon and indium phosphide photonic integrated circuits could—according to Beck Mason, the company’s senior vice president and general manager for telecom transmission—create opportunities at Lumentum for “increased vertical integration in future optical transmission modules.” Mason added in a company press release that the deal will also bring “highly synergistic product lines” to take advantage of rapid demand growth now being seen from some cable and wireless providers for wavelength-tunable pluggable transceivers to help expand network capacity.

The IPG deal was not Lumentum’s only recent news on the acquisition front. At the beginning of August, the company announced the completion of its purchase of erstwhile competitor NeoPhotonics, in a cash transaction valued at some US$918 million. The NeoPhotonics acquisition, originally announced in November 2021, had reportedly aimed partly at beefing up Lumentum’s strength in areas such as 400G-plus transmission technology. But, as with many large deals of late, this one’s closing took a few months longer than anticipated owing to delays in regulatory approval from China’s State Administration for Market Regulation.

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