Analysts Forecast What's Next For Lumentum After The Oclaro Acquisition

Lumentum Holdings Inc (NASDAQ: LITE) confirmed Monday that its acquisition of Oclaro is complete.

What Happened

Lumentum's finalized acquisition of Oclaro creates a new entity with greater scale in telecom and datacom markets, Barclays' Blayne Curtis said in a research report. The acquisition combines two optical companies into one, erasing the competitive threat the companies posed to each other.

The two companies will accelerate a combined roadmap with a more focused R&D spend and stronger financial profile, the analyst said. 

Why It's Important

Lumentum's acquisition of Oclaro is expected to shift its product mix, Raymond James' Simon Leopold said in a note.

As a standalone entity Lumentum's estimated calendar 2019 revenue breakdown is as follows, the analyst said:

• Telecom: 42 percent.
• 3-D: 35 percent.
• Industrial lasers: 13 percent.
• DataCom: 7 percent.
• Other: 3 percent.

As a combined entity, the company's product mix is now likely to look like the following, Leopold said:

• Telecom: 48 percent.
• 3-D: 27 percent.
• DataCom: 13 percent.
• Industrial Lasers: 10 percent.
• Other: 2 percent.

What's Next

Lumentum's acquisition could generate short-term synergies from SG&A savings as early as calendar 2019, Leopold said. The deal will likely prove to be complementary, with modest overlap, he said. 

Raymond James lifted its fiscal 2020 revenue estimates from $1.664 billion to $2.235 billion, while its EPS estimates moved higher from $5.64 to $5.81.

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