The American telecommunication equipment maker Finisar said yesterday it had acquired the Israeli start-up Red-C Optical Networks for as much as $43.7 million. The Israeli company is a spin-off of military electronics manufacturer El-Op that develops amplification technologies for fiber optics. The price includes $23.7 million in cash, with the rest contingent on Red-C meeting certain milestone over the rest of the year in terms of financial performance and employees' agreeing to remain on the payroll of the American company. The balance will be paid in cash or in Finisar shares.

Finisar already operates an Israeli research and development center in Nes Tziona based on the staff and technology of another start-up, Kailight Photionics, which was bought by the American company Optimum for $40 million in 2007. Optimum was acquired a year later by Finisar.

At this stage it is not clear whether Red-C's operations will remain in Israel. Red-C's two founders CEO, Yossi Boker and Chief Technology Officer Uri Ghera, each held 20% of the company and another 30%.

The Cedar Venture Capital fund held the remaining 50%. Optical communications companies were among the Israeli high tech sector's greatest failures and successes at the start of the last decade. The sale of Chromatis Networks for $44.7 billion to Lucent in 2000 inspired a wave of optical start-ups. Red-C was formed in 1998 when Chromatis' founders approached military optics maker El-Op to manufacturer components for them.

As the business developed, Boker, who was in charge of the fiber optics divisions at El-Op, formed Red-C with an initial investment of $12 million. In 2006, Boker and Ghera together with Cedar bought out El-Op and MRV Fund, then the two shareholders in Red-C. "Despite the fact that it was formed in the era of the bubble, Red-C always had both feet ion the ground," Boker said.