Calix to Acquire Occam Networks for $171M in Stock and Cash - UPDATED

  • Calix
  • FTTH
  • Occam
PETALUMA, CA & SANTA BARBARA, CA -- Broadband access vendors Calix and Occam Networks have just announced a definitive agreement for Calix to acquire Occam Networks in a stock and cash transaction valued at approximately $171 million -- about $7.75 per outstanding share of Occam Networks stock, or 8 percent above Occam's closing stock price of $7.20 yesterday. One nonmanagement member of the current Occam Networks Board of Directors is expected to be appointed to serve on the Calix Board of Directors.

Both companies provide communications service providers across North America, the Caribbean, Latin America, and select global markets with similar portfolios of advanced fiber- and copper-based broadband access systems, which are used to provide residential and business subscribers with such services as high-speed Internet, IPTV, VOIP and Ethernet business services.

Both companies -- and their customers -- expect to benefit from the deal. For Calix, not only is the acquisition anticipated to be accretive to non-GAAP earnings per share in the first quarter post-close, but the company will also gain access to Occam's expertise in a strategically important area: Ethernet fiber-to-the-home technology. Occam focused on active Ethernet for most of the last decade and added PON technology later, while Calix took the opposite tack. Carl Russo, president and CEO of Calix, says that acquiring Occam will greatly accelerate Calix's Ethernet development program.

For Occam, a company about half the size of Calix, joining forces with Calix should create opportunities to compete for, and win, significantly larger broadband access projects. Juan Vela, director of solutions marketing and strategy at Occam, expects the acquisition to provide the "ability to scale in a nonlinear way." Most of Occam's business has been with Tier 3 telephone companies in the United States, and Vela anticipates becoming a stronger competitor not only for Tier 2 telephone company business, but for MSO, municipality and international projects. Like Occam, Calix has a large customer base among Tier 3 telcos, but it holds a much stronger position than Occam among Tier 2 telcos such as Windstream, CenturyLink and Frontier.

Another likely advantage for Occam is increased access to capital.

According to Russo, feedback from Calix customers about the acquisition agreement has been enthusiastic. After the acquisition, customers of both companies will be able to select the best of both Calix and Occam technologies and make them work together. Although the two companies have broadly similar product lines, they have emphasized different features and functions, and their offerings are now somewhat complementary. Today, there is little overlap among their customers (Broadband Properties' fiber deployment list shows the two companies sharing 10 FTTH customers, all of them small; as the list is incomplete and both companies also sell DSL technology, the overlap is actually somewhat larger) and even the few telcos that purchase from both vendors cannot use their products side by side. Russo says many customers have had to "go without" features they might have liked from one company because the other company's products were a better fit overall.

“The rate of change is accelerating for communications service providers, and Calix is fully committed to providing our customers with the broadest portfolio of innovative access network options to adapt to this changing world,” said Carl Russo, president and chief executive officer of Calix. “By combining Occam Networks’ expertise in IP and Ethernet, Calix’s strength in fiber access, and both companies’ experience in copper access, we believe there is a clear opportunity to further enhance the Calix Unified Access portfolio, accelerate its future innovation, and enable greater broadband deployment by communications service providers globally. As a result of this acquisition, communications service providers can expect new innovations to the expanded Calix Unified Access portfolio that directly address the emerging needs of the broadband-connected consumer while also making these communications service providers more capitally and operationally efficient. We are excited about what this combination of top engineering and support talent will mean to bringing new and accelerated access network innovation to our joint customers and communications service providers.”

“With more than 380 communications service providers as customers and a robust access systems portfolio, Occam Networks has become synonymous with IP and Ethernet access innovation, yet with the rate of change in our industry continuing to increase, we were looking for ways to accelerate our rate of innovation,” said Bob Howard-Anderson, Occam Networks’ president and chief executive officer. “By combining our extensive IP and Ethernet access platforms and resources with Calix’s robust Unified Access portfolio and deep expertise in fiber access, we lay a foundation for extensive future innovation. We are excited about the opportunity to combine forces with Calix, and with the cultures of continued innovation and commitment to customer success that both companies share, we believe we can bring accelerated access network innovation and opportunity to communications service providers, consumers and businesses alike.”

Calix expects to complete the acquisition in the fourth quarter of 2010 or first quarter of 2011, subject to Occam Networks stockholder approval, receipt of required regulatory clearance and the satisfaction of certain other customary closing conditions. Occam Networks stockholders representing approximately 27 percent of Occam Networks’ outstanding common stock have signed an agreement to vote their shares in favor of this transaction.


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