Acquisition: ADC Telecommunications Acquires Spectracom, Developer of High-Powered 980nm Pump Lasers - Company Business and Marketing

Cambridge Telcom Report, May 31, 1999

ADC Telecommunications, Inc. (Nasdaq: ADCT; www.adc.com) Wednesday announced the signing of a definitive agreement to acquire the assets of Spectracom, a developer of high-powered pump laser chips and modules for use in fiber-optic networks.

The acquisition will provide ADC with further depth in the burgeoning optics market and positions the company to be a major supplier of both passive and active optical components and modules to telecommunications original equipment manufacturers (OEMs). The deal is valued at up to $105 million, with $60 million paid in cash at closing and a possible, additional $45 million payable based on future technology developments. The acquisition is subject to approval under the Hart-Scott-Rodino Anti-Trust Act.

Spectracom has patent-pending applications for the development of reliable, high-powered 980 nanometer (nm) pump laser diodes and modules for use in Erbium Doped Fiber Amplifiers (EDFAs), which enable wavelength division multiplexing (WDM) technology.

"Active optical components are becoming critical to maximizing available bandwidth within the fiber-optic network," said Lynn Davis, president and general manager of ADC's Broadband Connectivity Group. "Spectracom's exceptional research and development capabilities provide us with leading-edge technology and products that can quickly establish ADC as an influential company in the optics market."

The Spectracom acquisition will mark ADC's third purchase of an optical component company in the past four years. Acquired in 1995, AOFR is a world leader in fused biconic taper couplers and recently released ADC's high performance bragg grating based DWDM (dense WDM) products. Princeton Optics, acquired in 1998, provides core expertise in assembling and aligning mirrors, prisms and lenses used in producing ADC's optical attenuators, collimators, circulators, isolators and polarizers. When combined, these optical technologies create core passive and active optical modules for telecommunications systems suppliers.

"ADC is clearly establishing itself as a worldwide leader in optical modules and components, and Spectracom is excited to become a part of ADC," said Paul Colombo, chairman of the board of Spectracom. "ADC's manufacturing excellence and extensive sales, service and support capabilities coupled with Spectracom's technology expertise in active optical components will create a dynamic organization to meet the needs of optical systems manufacturers."

WDM is emerging as a viable optical communications technology to handle the increased demand of network bandwidth due to the explosion of voice, video and data communications needs. The evolution of WDM and DWDM technologies is driving demand for 980 nm pump lasers, which have proven to be one of the most reliable and cost-effective amplification sources for EDFAs. Other benefits of the 980nm pump laser modules include their low-noise and reduced thermal and electrical demands as it relates to EDFA output power.

Industry analysts have estimated the size of the pump laser module market in 1999 at more than $200 million, growing to more than $1 billion in 2002. New DWDM and submarine network deployments, long-haul network expansions, and the emergence of new high-speed service providers are expected to fuel this market growth. Long-range forecasts are impacted by additional bandwidth demands such as metropolitan area networks, optical cross-connect products and optical add/drop multiplexers (OADM).

Spectracom is headquartered in White Bear Lake, Minn., and was founded in 1997. Spectracom will become part of ADC's Broadband Connectivity Group. ADC will assume control of Spectracom's research and development and manufacturing facility in White Bear Lake upon consummation of the transaction.

ADC Telecommunications, Inc., is a leading global supplier of voice, video and data systems for telephone, cable television, Internet, broadcast, wireless and private communications networks. ADC's systems enable local access and high-speed transmission of communications services from providers to consumers and businesses over fiber-optic, copper, coaxial and wireless media. Headquartered in Minneapolis, Minnesota, ADC has approximately 9,600 employees around the world and annual sales of $1.5 billion. FMI: www.adc.com.