Casa Systems to sell off its cable and 5G core/RAN businesses

Casa Systems intends to sell off its cable business and sizable chunk of its mobile/wireless business under a court-supervised Chapter 11 process.

In a move that stands to further consolidate the cable tech sector, Casa Systems has entered a stalking-horse asset purchase agreement to sell its cable business to Canada's Vecima Networks for about $20 million. Casa has asked a Delaware bankruptcy court to approve procedures for soliciting additional bids and to set an auction for its cable assets in mid-May.

As part of that court-supervised process, which aims to generate the maximum value for Casa's businesses, Casa has also reached a deal to unload its "Axyom"-branded 5G mobile core and RAN assets to Lumine Group. Financial terms were not announced, but Casa has asked the court for approval to complete the transaction with Lumine by the end of April.

Update: Pending approval, Lumine has offered to pay for those assets for $15 million, according to an SEC filing.

Lumine Group, a Toronto-based company that specializes in corporate divestitures, has acquired several business units of late, including Synchronoss's messaging and NetworkX business units, and Nokia's device management and service management platform businesses. Other companies in Lumine's portfolio include Incognito Software Systems (BSS/OSS platforms), Ubersmith (cloud-based subscription management) and WDS Mobile (mobile customer experience products).

Related:Casa Systems founder Jerry Guo stepping down as CEO

NetComm's future still being determined

Casa said NetComm, a fixed wireless access unit that Casa acquired in 2019, is not part of the US Chapter 11 process. Casa said it launched voluntary administration proceedings for the NetComm business under Australian law on March 11, 2024.

Update: A Casa official said the company has been seeking a buyer for the NetComm business over the past year as the company looked to focus on its core cable, cloud and small cell business.

"Unfortunately, after entering into an exclusivity period with a potential buyer, the party was unable to complete a transaction," the official said in an emailed statement. "For the time being, NetComm is expected to operate as normal while the appointed administrators determine the best path forward to maximize value, which may include a sale of the business or its assets or an orderly wind down of its operations."

The company is in talks with other potential buyers of the NetComm business.

Under pressure

Casa's decision to sell off assets under the Chapter 11 process enters the picture amid struggles across the company. Casa Systems generated total Q3 2023 revenues of $62.08 million, down from $66.89 million in the year-ago period, and swung to a net loss of $25.61 million. Cable product revenues plummeted to $8.22 million in Q3 2023, down from $20.57 million in the year-ago period. Casa laid off more than 10% of employees last year.

Related:Casa cuts staff, remains 'totally committed to cable'

"Like many in our sector, Casa has experienced a significant decline in revenue and profits due in large part to industry-wide downward capital investment and procurement trends in the cable and telco markets," Casa President and CEO Michael Glickman said in a statement. "We also have incurred significant investments to bring our 5G Mobile Core and RAN products to market. We believe the sales of our businesses through a Chapter 11 process will maximize value, preserve jobs and minimize disruption for our customers."

Glickman, a former PacketFabric and Cisco Systems exec, took the reins of Casa last August, succeeding Casa founder Jerry Guo, who stepped down from that role last March.

Update: Casa confirmed that it currently has about 823 employees, and expects there will be opportunities for a number of them under the new owners, pending the outcome of the sale process. "Part of the reason we chose to facilitate these sales through a Chapter 11 process is that this method helps maximize job preservation," a Casa official said.

Related:New Casa CEO recalls vendor being a 'very tough competitor'

Tied into the sale process, Casa has entered a restructuring support agreement with more than 98% of its senior secured lenders that will enable Casa to use cash on hand and proceeds of its proposed cloud/RAN sale to fund its operations and the Chapter 11 process.

Casa shares were down 20 cents (-80.62%) to 4 cents each in Wednesday morning trading.

Vecima's opportunity

Casa's struggles have opened a door for Vecima, a supplier of video, cable and fiber access gear that has made recent acquisitions of its own, including ATX Networks' technology for standardized Generic Access Platform (GAP) node products in 2021, and Nokia's cable access portfolio in 2020.

Vecima is in the driver's seat for Casa's cable business via its $20 million stalking-horse bid. But it's possible that another entity could step in with a higher bid during the auction process.

But if Vecima comes out on top, the acquisition could expand and accelerate the company's broader access network strategy across both hybrid fiber/coax (HFC) and fiber-to-the-premises (FTTP) products and technologies. It's not yet clear how many Casa employees will join Vecima if a formal deal comes together.

One area where Vecima could benefit is in a budding virtual cable modem termination system (vCMTS) market that is currently being led by Harmonic.

Casa, which counts Liberty Global, Vodafone and Rogers Communications among its customers, has already notched deployments of its own vCMTS. Vecima entered the vCMTS market last month. Vecima said then that it had a lab trial commitment with an unnamed Tier 1 operator in North America, with plans to start field trials worldwide in Q4 2024.

Vecima has not announced any specific plans for Casa's vCMTS, but a deal for Casa's cable business would accelerate Vecima's vCMTS strategy and secure it as the market's number two vCMTS supplier.

CommScope, which is also exploring a potential sale of its cable access business, recently reentered the vCMTS game and has secured operator commitments for the new product.  

Update: A play for Casa's cable business stands to solidify Vecima's vCMTS product line, more rapidly scale its emerging vCMTS business and "chip away at Harmonic's lead," Jeff Heynen, a Dell'Oro Group VP and analyst who covers the broadband access and home networking sectors, said.

Even though Comcast, one of Harmonic's marquee customers, is pushing ahead with its deployment of vCMTSs and a distributed access architecture, opportunities are there for others suppliers to secure a foothold.

"As more operators make that transition [to DAA and the vCMTS], the market is still wide open," Heynen said.

Vecima, Heynen added, will also benefit from Casa's integrated CMTS footprint, including its C100G chassis, that will continue to generate DOCSIS license revenues. Charter Communications does use Casa CMTSs, but recently selected Harmonic as a vCMTS supplier for the operator's HFC upgrade initiative.

Additionally, Casa's widely deployed integrated CMTS chassis could be made to support next-generation DOCSIS 3.1 networks that are expected to gain traction among small and midsized cable operators.

Casa's virtual broadband network gateway (vBNG) product line might also make a good fit for Vecima's fiber access business.

More specifically, Vecima could use Casa's vBNG product to help cable operators transition to fiber with XGS-PON technology, Dell'Oro's Heynen said.