JDSU to split into two companies

JDSU, one of Sonoma County’s largest high-tech employers, announced plans Wednesday to split itself into two publicly traded companies.

JDSU’s Santa Rosa division, which traces its roots to a local startup launched more than six decades ago, will remain intact but become part of a new company whose workers produced nearly $950 million in revenues last year, JDSU president and CEO Tom Waechter said Wednesday.

The local division benefits from “a really strong leadership team,” Waechter said. “They have a very good strategy in how to grow the business.”

The Santa Rosa facility employs 415 workers and is headquarters to the company’s Optical Security and Performance division. With about $200 million in annual revenue, the unit makes such diverse products as anti-counterfeiting materials, thin-film optical products and 3-D sensing devices.

Milpitas-based JDSU is the second tech company with a major presence in Sonoma County to announce a breakup in the last year. Last fall, Agilent Technologies announced a plan to split the Santa Clara-based company in two parts. In November, its Santa Rosa electronic measurement facility is scheduled to become the global headquarters of a new publicly traded enterprise, Keysight Technologies.

Both Agilent and JDSU said splitting their diverse operations into distinct, focused companies would make it easier for investors to value their businesses.

“We found that for most analysts and investors, it was a bit complex to follow,” Waechter said.

The move is also designed to give each company greater agility and focus as the pace of technology change accelerates, JDSU said in a statement.

One company, consisting of JDSU’s current Communications and Commercial Optical Products unit, will focus on optical components and commercial lasers, pursuing a $7.4 billion market expected to grow 11 percent annually. The company, which generated $794.1 million in revenues in fiscal 2014, will be led by Alan Lowe, the unit’s president since 2008 and the executive vice president of JDSU.

The second company, to be led by Waechter, will focus on networking equipment, software and services to support the communications industry’s transition to software-defined networks, targeting a $7 billion market expected to grow 6 to 8 percent annually. The Santa Rosa division will operate as a separate business segment inside this company.

The split is expected to be completed in the third quarter of 2015.

Each of the new companies likely will be based in the South Bay, Waechter said. But no decision has yet been made on whether either enterprise will retain the JDSU name, he said.

Dick Herman, president of 101 MFG, a Petaluma-based alliance of manufacturing executives, said the JDSU split comes at a time when “the growth prospects are huge” for the Santa Rosa division’s thin-film optical and anti-counterfeiting businesses.

“Frankly, they’re enjoying a healthy resurgence here,” Herman said.

The separation is expected to occur through a tax-free spinoff to JDSU shareholders, though the structure is subject to change based upon various tax and regulatory factors.

“Over the past five years, JDSU has invested heavily in innovation that is well aligned with the industry’s best growth opportunities, including cloud networking, data center expansion and software-defined networks,” Waechter said in a statement.

“We believe two fundamentally focused companies best position us to stay ahead of the accelerating pace of technology change and to compete even more effectively across the unique markets we serve today,” he said. “Now is the time to make this transition, giving these businesses the opportunity to maximize their success while providing shareholders with distinct investment opportunities in two growth markets.”

JDSU acquired its Santa Rosa unit in 1999 when it purchased Optical Coating Laboratory Inc. for $6.2 billion in stock. The Santa Rosa company, which was founded in 1948 by Rolf Illsley, employed more than 1,200 people in Sonoma County at the time of the acquisition.

You can reach Staff Writer Robert Digitale at 521-5285 or robert.digitale@pressdemocrat.com. On Twitter @rdigit

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Editor’s Note: This story has been altered to reflect the following correction. We originally stated that OCLI was acquired for $2.8 billion in stock. That was the initial estimate, but the company stock soared and JDSU ended up giving stock worth $6.2 billion.