BUYBACK—Luminent Returns to the MRV Fold a Year After IPO

MRV Communications Inc. has bought back all the stock of its onetime spin-off, Luminent Inc., and will return it to the corporate fold, giving at least one tech expert reason for optimism about MRV’s immediate future. Chatsworth-based fiber optics maker MRV has agreed to buy back 11.2 million shares of its smaller subsidiary, Luminent Inc. The deal is worth $21.2 million. Luminent, a Chatsworth-based former unit of MRV, went public in November at $12 a share. Its stock price has dropped to $1.86. “Obviously, they’re seeing longer-term prospects for recovery that suggest holding on to the company,” said Jonathan Kramer, an independent telecommunications consultant based in Los Angeles. Noam Lotan, president and CEO of MRV, said Luminent’s value will be enhanced by what he characterized as a merger, giving it a better chance at recovering its declining market share in a down tech economy. “The business of Luminent will be better served when integrated into MRV,” Lotan said. “By applying MRV’s system level know-how, we achieve a higher level of integration of optical components and optical subsystems… thereby better supporting existing customers while creating new market opportunities.” Lotan said that, through the acquisition, MRV will enhance its competitive position by consolidating its operations and removing duplicate activities and eliminating inefficiencies. Kramer, agreed, saying the merged firms will be leaner and trimmer and ready to take on competitors when the tech industry begins recovering. “Purchasing cycles are a lot longer now, so we probably won’t be seeing reports of recovery hitting (MRV’s) quarterlies for a few more months,” Kramer said. Last week, Luminent announced that it would likely not meet its targeted revenue figures for the third quarter which ended Sept. 30. The company said it expects to earn $20 million to $21 million, well below its target of between $26 million and $30 million announced on July 23. Luminent cited continued low demand for products due to high inventories throughout the industry. Kramer said the return of Luminent to MRV and its other related businesses gives MRV a solid base to compete in a tough tech market. “Two of their units are focused on wireless solutions and MRV’s five business units, including Luminent, fit nicely together to provide connectivity solutions,” Kramer said. Kramer, like other tech analysts, expects the tech sector to begin recovery by early next year, though he admitted U.S. military action in the Middle East could throw all prospects for recovery out the window. As part of the deal, Luminent President William R. Spivey resigned and was replaced by MRV’s Lotan, who also assumed the post of interim CEO. Last year, amid a declining tech sector, MRV reported a loss of $153 million on revenue of $319.4 million, compared to a year earlier when it lost $12.9 million on $288.5 million in revenue. In 2000, Luminent reported a $65 million loss on $124.2 million in revenue, while reporting a $4.2 million profit on $65.3 million in revenue in 1999.