Oclaro, Inc. (OCLR - Snapshot Report) recently signed a definitive agreement to sell the assets of its Santa Rosa thin film filter business to Photop Technologies, Inc.
Photop Technologies, Inc., is a wholly-owned subsidiary of II-VI Incorporated
(IIVI - Snapshot Report
) . Following the asset sale, Oclaro will also divest its interleaver product line to Photop Koncent, Inc. (FuZhou), a wholly owned subsidiary of II-VI.
The company expect to complete both the divestitures by December 3, 2012.
Oclaro expects to receive $27 million in cash from the sale of these assets, $23 million to be paid upon closing, $3 million payable on or before December 28, 2012 and $1 million to be held in escrow until December 31, 2013.
Oclaro expects to focus on its core competencies using the proceeds from divestiture of its thin film filter business and the interleave product line.
Management plans to use the proceeds from these deals to improve its balance sheet and provide additional operating flexibility to better serve its global customer base.
These asset lines generated revenues of $3.6 million in the September quarter. However, the sale of these product lines will reduce revenues for the December quarter by approximately $2 million. Oclaro expects to report revenues between $145 million and $162 million in the December quarter.
The acquisition of Oclaro’s product lines are expected to strengthen Photop's core business and broaden its global footprint and facilitate diversification into the growing life sciences market.
Meanwhile, earnings estimates for Oclaro for fiscal 2013 plummeted significantly after the company missed the estimates by 13 cents in the first quarter of fiscal 2013.
The first quarter results were affected by the company’s execution issues and the intensive integration efforts during the quarter. Oclaro and Opnext completed their merger on July 23, 2012.
In addition, in tandem with other industries, the optical component industry is currently going through a downtrend. We continue to maintain a Neutral recommendation on Oclaro, Inc. In the near term, we have a Zacks #4 Rank, which translates into a short-term rating of Sell.