Hitachi Ltd. (HIT) spun off its fiber-optic component business into a separate U.S. company Tuesday to be jointly run by Hitachi and Clarity Group, an equal partnership between Los Angeles private-equity firm Clarity Partners and Marubeni Corp. (MARUY), a Japanese trading house.
Clarity and Marubeni will invest as much as $450 million in the spinoff, called OpNext, and Clarity's David Lee will become the company's co-chairman.
Clarity Partners was recently formed by Stephen Rader and Rudy Reinfrank, name partners at Rader Reinfrank & Co., and Lee and Barry Porter, founders of telecom company Global Crossing Ltd. (GBLX) and two of L.A.'s richest people, each worth about $600 million to $800 million. Clarity is in the process of raising $1 billion for its first fund.
"Fiber optics is an area that has received a lot of attention from the investment community lately," Lee says. "That's because of its affect on the data communications industry."
Lee says the explosion of fiber-optic technology is doing to data communications what advancements in the semiconductor business did to the computing industry in the 1980s and '90s.
Optical technologies allow residents and companies in metropolitan areas to use fiber networks to transmit and receive data and voice services on pulses of light. The market for optical components for long-distance telecom and cable television will grow from $6.6 billion in 1999 to more than $23 billion by 2003, according to telecommunications research firm Ryan Hankins & Kent.
Investors see green in the projections. Throughout 2000, fiber-optic companies have been among the most popular for investors interested in high-tech. While souring on pure-play Internet e-commerce IPOs, the market has taken to optical networking companies such as ONI (ONIS) Systems and New Focus, a maker of optical components.
According to Lee, Hitachi was a main supplier of data communication components to Global Crossing Ltd. The connection is indicative of the kind of alliances that newly formed Clarity can make with the large global communication concerns, he said.
"Because of our experience at Global Crossing, we have a large number of contacts in this business at a commercial level," Lee says.
One such contact committed to Lee's firm this month. Harry Bosco, most recently the president of Lucent Technologies Inc.'s optical-networking group, will join Clarity as a special venture partner in October. Bosco will evaluate investments in communications and network infrastructure for the firm.