JDS Swoons as Deal Faces Sharp Antitrust Scrutiny

If you liked the recent Bernie Ebbers/WorldCom action, you'll just love the latest from JDS Uniphase (JDSU Quote).

The leading maker of optical components for the Internet saw its shares slide 13% Monday after it unveiled a plan to buy rival SDL (SDLI Quote) for an eye-popping $35.7 billion in stock. While JDS was talking about smashing second-quarter earnings targets and adding capacity to slake manufacturers' thirst for its products, Wall Street was aswirl in questions about valuation, integration and even monopolization.

JDS fans remain steadfast, contending that the deal creates a stronger company and that regulators won't block it because consumers aren't directly affected. But analysts and investors warn that the deal gives JDS a stranglehold on a key market, a reality regulators are unlikely to ignore. That could put JDS shares under a cloud for some time while the deal makes its way through Washington. Indeed, SDL's 8.6% jump Monday left it about 63 points below the deal's indicated value, suggesting some skepticism on Wall Street over the deal's prospects.

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