Lucent snaps up Chromatis for $4.7 billion

Lucent Technologies (NYSE: LU) confirmed reports it will acquire Chromatis Networks Wednesday, announcing a stock transaction worth about $4.5 billion, slightly less than the $5.7 billion speculated in Tuesday's reports.

Lucent shares closed at 57 3/4 Tuesday, having risen slightly with reports of the deal and a tech comeback. Along with competitors Cisco (Nasdaq: CSCO) and Nortel (NYSE: NT), Lucent has been honing its focus on optical networking. It has also been focusing on areas such as infrastructure, wireless and semiconductors; the company was said to be in talks with communications chip-maker Metalink (Nasdaq: MTLK) early in May.

Competitor Nortel (NYSE: NT) recently snapped up another maker of strategic optical components, buying Photonic Technologies for $35.5 million in cash.

Chromatis, which specializes in metro optical networking systems, will give Lucent a technology that can reduce the cost of building metro optical networks by one-half while radically improving their performance. Metropolitan networks act as a bridge carrying Internet traffic from the larger network core to commercial office spaces, or residential buildings. Because these are short-distance networks with a mix of existing and new equipment requirements, optical networking has not previously been seen as a cost-effective technology. The acquisition will bring bandwidth-expanding power directly to Lucent's business customers, the company said.

Under the deal, Lucent will buy privately held Chromatis for 78 million shares, valued at about $4.5 billion, based on Lucent's May 30 closing price of $58.19. This excludes the 7 percent stake in Chromatis that Lucent already owns. Some key employees of Chromatis also could receive an extra 2.5 million shares -- valued at about $145 million -- if Chromatis meets certain performance goals.

Lucent expects the deal, which will be accounted for as a purchase, to be completed by June 30. The acquisition is expected to dilute Lucent's pro forma earnings per share for ongoing Lucent operations by about 2 cents in fiscal 2000 and 5 cents in fiscal 2001.