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Salomon Says Furukawa May Sell Part of JDS Stake to Finance Lucent Deal

Japanese telecommunications firm


may be preparing to sell some of its stake in

JDS Uniphase


to facilitate the acquisition of



fiber-optic business.

Furukawa, along with


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, is purchasing the Lucent operation for about $2.75 billion. Furukawa is acquiring the majority of the business.

Furukawa holds a significant stake in

JDS Uniphase


and may need to sell a portion of its holding in order to secure the deal, according to research from Salomon Smith Barney. The firm estimates that Furukawa holds 8% of JDS Uniphase's shares.

Lucent, which is struggling to keep its head above water, is not likely to accept a large equity position from Furukawa in exchange for its optical fiber outfit. "As a result, we think it is highly likely Furukawa may liquidate part of JDSU holdings to finance its Lucent asset purchases. If this occurs, and factoring in the low summer trading volumes and relatively weak investor support for JDS Uniphase, we would expect the shares to see short-term pressure," Salomon analyst Timothy Anderson wrote in a research note.

However, the analyst did say that he maintains a positive long-term outlook. "Long-term we continue to positively view JDS simply because conditions are difficult enough that the company may be the last

one standing when growth returns," he wrote.

JDS fell 5.3% to $8.67 in recent trading on the