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Barriers to consolidation

March 13, 2008

Posted by Stephen Hardy

Everyone says that the optical components space needs to consolidate -- but, based on observations made at the OSA/Lightwave Executive Forum right before OFC/NFOEC, industry executives don't think consolidation will reach the levels necessary for a healthy industry any time soon. Here's a list of some of the barriers to consolidation that I've heard about over the last three weeks. For more details, keep an eye out for an article I'm in the middle of writing for our April issue.

Why Consolidation is Happening Slower than Necessary

1) Mergers between weak companies won't work -- and how many strong, profitable companies do you know of in the optical communications space?
2) You can do a deal that favors the shareholders of one company, but it's tough in the current environment to benefit shareholders of both companies.
3) Japanese companies don't do M&A.;
4) The mathematics of merging two companies in the same market space look like this: 1 + 1 = 1.5.
5) Greed gets in the way sometimes.
6) That war chest I hoped to build with my IPO is much smaller than expected.
7) There are enough stupid VCs around to keep bad companies afloat.
8) Ego gets in the way sometimes.

Perhaps you've heard other reasons. If so, let's hear them.


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The Lightwave editorial staff uses The Lightwave Blog to share their thoughts on optical communications and whatever else might be the current topic of conversation from cubicle to cubicle. Feel free to add your own opinions.

Stephen Hardy is editorial director and associate publisher of Lightwave, which makes him responsible for the editorial aspects of the Lightwave franchise. A technology journalist since 1982, he once had his job duties described as "gets paid to tick off advertisers ".

Meghan Fuller is senior editor of Lightwave. She has degrees from Franklin & Marshall College in Lancaster, PA, and the University of Delaware and is a card-carrying member of Red Sox Nation.