Today we are seeing both II-VI and Applied Optoelectronics stock taking off, both are up almost 15% this morning.

Both have a significant focus on Datacentre Technology.

"According to Lightwave, ACG Research expects the optical datacenter market to grow with a CAGR of 44.9% annually through at least 2019. Let's compare that to a similar industry in global cloud infrastructure which will have a projected 10.9% CAGR through 2019 according to RnR Market Research. The semiconductor industry is expected to grow by 4.3% through 2019. From these examples, we can deduct that fiber optics is one of the fastest growing industries in telecommunications. Currently, heavy competition in CATV and datacenter sales is preventing any true victory to garner massive growth, so competitive advantages are placed at a premium.

Vertical Integration

One of the unique features of Applied Optoelectronics is that the company recently decided to vertically integrate more than most firms of its stature. Earlier in the year, it had supply concerns and disputes with its 40g suppliers. Now, the company manufactures a vast majority of the chips and other optical components used in its products. The firm also claims it has superior lasers that can withstand humidity and temperature changes better than that of the industry average. This appeals to the outdoor equipment users. Manufacturing all under one roof can take the best advantage of overhead costs. And for AAOI, this has proven to be superior than to outsource jobs to other firms."

(exerpt from http://seekingalpha.com/article/3776226-applied-optoelectronics-consistent-growth-ahead-in-a-growing-industry)

IMO, I believe II-VI's acquistion of ANAD and Epiworks is to following a similar strategy.