& cplSiteName &

ECI to Buy Laurel for $88M

Light Reading
Supercomm News Analysis
Light Reading
5/16/2005
50%
50%

ECI Telecom Ltd. (Nasdaq/NM: ECIL) is to buy B-RAS vendor Laurel Networks Inc. for $88 million in cash (see ECI Buys Laurel Networks).

Today's announcement follows months of negotiations that Light Reading believes were concluded early last week (see ECI Closing in on Laurel). The deal, expected to close within a few weeks, brings Laurel's technology, 150 staff, and $9 million in cash, giving the deal a $79 million net worth.

That's just more than four times Laurel's 2004 revenues of $18 million, derived from customers such as Level 3 Communications Inc. (Nasdaq: LVLT) and Korean carriers Dacom Corp. and KT Corp. (Korea Telecom), among others (see Laurel Scores at Level 3, Laurel Dates Dacom, Laurel Wraps Up KT Deal, and Laurel Lands Grande Deal ).

The move also represents ECI's latest attempt to challenge the industry's larger vendors. The company knows it needs to ramp up its IP capabilities if it is to win large carrier deals in competition with the likes of Alcatel (NYSE: ALA; Paris: CGEP:PA), Cisco Systems Inc. (Nasdaq: CSCO), Huawei Technologies Co. Ltd., and Siemens Communications Group, and has been vocal about its plans to acquire additional capabilities (see ECI Lines Up Acquisitions).

Late last year ECI invested in core IP router vendor Chiaro Networks Inc., and a full takeover looks likely (see Chiaro Lands ECI Investment). The acquisition of Laurel will give ECI an edge router with broadband remote access server (B-RAS) capabilities it can offer in conjunction with its Hi-Focus multiservice access gateway (see Laurel Joins B-RAS Pack, Laurel Steps Up on the Edge, and ECI Extends Broadband Access Portfolio). In addition, Laurel has recently been promoting its technology as video-friendly in an effort to attract carriers looking to provide IP video and IPTV services (see Laurel Pumps Up IPTV Plans). That will fit neatly into ECI's plans to target operators planning triple-play (voice, video, and data) service bundles.

ECI executives weren't immediately available to talk about the acquisition or about where else ECI might turn its M&A attentions. The company will hold a conference call regarding the Laurel acquisition at 3pm Eastern Standard Time (EST).

The deal appears to have come just in time for Laurel, which has only $9 million left in the bank. Without the acquisition, it could have ended up on the B-RAS scrapheap, or been bought for peanuts -- a fate that has befallen several other B-RAS players (see Tut to Acquire Copper Mountain and Tut's CoSine Deal Drags On).

That situation will likely have helped ECI broker a price that falls below Laurel's total funding to date, and is much lower than the $200 million-plus that some VCs had predicted. Laurel has raised $118 million in backing, including funds from venture capitalists and equipment vendor Ciena Corp. (Nasdaq: CIEN), which has been reselling Laurel's gear (see Ciena Takes Stake in Laurel and Ciena, Laurel Win in Spain).

Investors and carriers will want to know what will come of that relationship, and Laurel's current partnership with Marconi Corp. plc (Nasdaq: MRCIY; London: MONI), a head-to-head rival of ECI in the optical and access markets (see Laurel & Marconi Make It Official).

Heavy Reading analyst at large Graham Beniston believes there's little downside to this deal, and that ECI is acquiring a company with "very creditable technology. It leads many of the other B-RAS vendors in terms of scaleability." Adds Beniston, "This gives ECI a solution set to challenge the Marconis of this world."

— Ray Le Maistre, International News Editor, Light Reading

(28)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Page 1 / 3   >   >>
reoptic
50%
50%
reoptic,
User Rank: Light Beer
12/5/2012 | 3:15:01 AM
re: ECI to Buy Laurel for $88M
This is a good move for both companies. ECI picks up one of two available edge router/BRAS players for price much cheaper than Redback alternative. Laurel gets a channel it badly needs and a fair post bubble price. VCs don't get good returns on this one but they don't get a hole in the ground either which would be much worse. Just shows you that building a systems company is a high risk/low reward endeavor nowadays.
fiber_r_us
50%
50%
fiber_r_us,
User Rank: Light Beer
12/5/2012 | 3:14:58 AM
re: ECI to Buy Laurel for $88M
If the employees leave, why would the purchase be a good thing for ECI... They would be left with an unsupportable product.
fiber_r_us
50%
50%
fiber_r_us,
User Rank: Light Beer
12/5/2012 | 3:14:58 AM
re: ECI to Buy Laurel for $88M
I would think the employees basically got screwed here... Their options wouldn't be worth anything. So, all they can say is "I still have a job"! Look for resumes to hit the streets.
geof hollingsworth
50%
50%
geof hollingsworth,
User Rank: Light Beer
12/5/2012 | 3:14:58 AM
re: ECI to Buy Laurel for $88M
Given that the sale price is less than the money invested in Laurel, and management will certainly be getting part of the proceeds, wouldn't it be more like a "high risk, NO return" business?
5urf5hop
50%
50%
5urf5hop,
User Rank: Light Beer
12/5/2012 | 3:14:57 AM
re: ECI to Buy Laurel for $88M
>I doubt ECI was so stupid to screw the common >shares, because $88M would have been more than >enough to start an inhouse effort from scratch.

Really?

Just ask the ex-Procket folks. Both common and preferred got screwed. And yes, many are walking ...
Stevery
50%
50%
Stevery,
User Rank: Light Beer
12/5/2012 | 3:14:57 AM
re: ECI to Buy Laurel for $88M
Just ask the ex-Procket folks. Both common and preferred got screwed. And yes, many are walking ...

Dismembering Procket was a great move by Cisco. They bought only the software portion (which was a lower price than the hardware side or the combined entity) and they took a bunch of talented software guys off the competitive market for a while.

I really doubt csco wanted to make Procket work, since the purchase occured during the same month as the CRS announcement.

And yes, screwing the common there was exactly what was required for complete dismemberment.
Stevery
50%
50%
Stevery,
User Rank: Light Beer
12/5/2012 | 3:14:57 AM
re: ECI to Buy Laurel for $88M

I would think the employees basically got screwed here... Their options wouldn't be worth anything.

You're right, they'd just walk, or get lazy.

I have NEVER seen a deal that screwed the common EVER pay off for the aquirer. Not one. Even dumping the managers and handing out incentives rarely works, because you are left with the hallow shell of what used to be a team.

I doubt ECI was so stupid to screw the common shares, because $88M would have been more than enough to start an inhouse effort from scratch.

lightreceding
50%
50%
lightreceding,
User Rank: Light Beer
12/5/2012 | 3:14:40 AM
re: ECI to Buy Laurel for $88M
putting the resume out there and getting another job is not so easy. The street is flooded with resumes. If it was easy to move on Redback would be vacant, as they all got screwed during the refinancing. The employees are still there just for the job. In any case this seems to be a good move for ECI. They get Laurel cheap and add to their portfolio. They do need to focus on keeping people movtivated at Laurel. But that is obvious.
DPD
50%
50%
DPD,
User Rank: Light Beer
12/5/2012 | 3:14:36 AM
re: ECI to Buy Laurel for $88M
If it was easy to move on Redback would be vacant, as they all got screwed during the refinancing. The employees are still there just for the job.

What makes you an expert on the majority of employees at Redback? How do you what they do and don't want? Maybe they like it there. Maybe the company repriced their options. You shouldn't make blanket statements like that without data.
lightreceding
50%
50%
lightreceding,
User Rank: Light Beer
12/5/2012 | 3:14:36 AM
re: ECI to Buy Laurel for $88M
How do you know that I don't have data?
Page 1 / 3   >   >>
From The Founder
Download our complete guide to de-risking NFV deployment in 2016, including:
  • An eight-step strategy to deploying NFV safely, based on input from the companies that have already started virtualizing their production networks.
  • Interviews with leading executives at Colt, AT&T, Deutsche Telekom, Cisco, Nokia, ZTE, Ericsson and Heavy Reading.
  • Flash Poll
    Live Streaming Video
    Prepping for the Future: Upskill U Explained
    During this short kick-off video, Doug Webster, Vice President of Service Provider Marketing, Cisco, and Light Reading’s CEO & Founder Steve Saunders give an overview of Upskill U.
    Telecom Innovators Video Showcase
    Atrinet's NetACE – Migration to NFV & SDN With NetOps-Driven LSO

    5|4|16   |     |   (0) comments


    At Atrinet's headquarters, Ray Le Maistre sits down with Roy Silon to get an in-depth look into the company's focus and the secret recipe for their success.
    LRTV Huawei Video Resource Center
    Amsterdam ArenA, Powered by Huawei

    5|4|16   |     |   (0) comments


    Huawei's ICT solutions power the state-of-the-art Amsterdam ArenA, turning it into a smart stadium.
    LRTV Interviews
    Testing When There's No 'There' There

    5|4|16   |     |   (0) comments


    The benefits of SDN/NFV are well known, but the transition comes with some challenges, prominent among them is: how do you test a network that has been abstracted and has the potential to be endlessly reconfigurable? Light Reading was at NFV World Congress in Santa Clara, Calif., where we bumped into Mats Nordlund, CEO and co-founder of Netrounds, a Swedish ...
    LRTV Interviews
    Ditching the Slash & the Orchestration Wars

    5|3|16   |     |   (2) comments


    SDN and NFV have been inextricably bound with each other for so long that on a conceptual level, smooshing them together into one catch-all phrase – SDNFV – is now justifiable, according to Dan Pitt, executive director of the Open Networking Foundation (ONF). Light Reading spoke to Pitt at the NFV World Congress, where he explained that the next ...
    LRTV Custom TV
    ZTE TV Connect Highlights

    5|3|16   |     |   (0) comments


    ZTE gives us a tour of its booth and new products at TV Connect in London.
    LRTV Custom TV
    Deluxe's Unified Delivery Solution

    5|3|16   |     |   (0) comments


    Join Alan Breznick of Light Reading and visit the Deluxe booth at NAB! Here you'll find Deluxe's Unified Delivery Solution, OTT video, virtual reality, HDR, 4K and much more!
    LRTV Interviews
    Verizon Puts Gray Boxes in the Shade

    5|2|16   |   04:33   |   (1) comment


    When it comes to the white box trend, "gray" boxes, which have a slight proprietary twist, don't give service providers and end users the advantages they're seeking, according to Verizon's Vice President of Product and New Business Innovation Shawn Hakl.
    LRTV Custom TV
    Dealing With a Disrupted Video Market

    5|2|16   |     |   (0) comments


    Ericsson's Simon Frost discusses how traditional pay-TV providers can cope with the big changes wrought by the rise of OTT video and IP technology.
    LRTV Custom TV
    The VNF Responsibility of Red Hat

    5|2|16   |     |   (0) comments


    At MWC, Caroline Chappell of Heavy Reading visits the Red Hat booth and sits down with Chris Wright to talk about the responsibility the VNF needs to take on in order to ensure the operators get the carrier-grade performance they expect for their network.
    LRTV Interviews
    AT&T Expert on the Key Pillars of UC

    4|29|16   |   03:58   |   (0) comments


    Vishy Gopalakrishnan, AVP of product marketing at AT&T, talks about the three developments that are making unified communications and collaboration secure and reliable for enterprise users.
    LRTV Documentaries
    LRTV Report: Mobile Core Innovation

    4|28|16   |   25:32   |   (0) comments


    Hear from multiple industry experts from Deutsche Telekom, SK Telecom, Heavy Reading, Huawei, Cisco, Ericsson, Nokia, NEC and many more about developments in the mobile core as operators virtualize their IMS and evolved packet core systems and prepare for a 5G world.
    LRTV Huawei Video Resource Center
    NFV World Congress Highlight

    4|26|16   |     |   (0) comments


    The highlight of the NFV World Congress contains exciting telecom news. Join us for an inside look at Huawei's ICT 2020 plan and its latest collaboration with industry leaders.
    Upcoming Live Events
    May 23, 2016, Austin, TX
    May 23, 2016, Austin Convention Center
    May 24-25, 2016, Austin Convention Center, Austin, TX
    September 13-14, 2016, The Curtis Hotel, Denver, CO
    December 6-8, 2016,
    June 16-18, 2017, Austin Convention Center, Austin, TX
    All Upcoming Live Events
    Infographics
    A new survey conducted by Heavy Reading and TM Forum shows that CSPs around the world see the move to digital operations as a necessary part of their overall virtualization strategies.
    Hot Topics
    Ultra-Broadband Summit, Hong Kong
    Iain Morris, News Editor, 4/27/2016
    Amazon AWS Reports $2.6B Quarterly Revenue, Up a Colossal 64%
    Mitch Wagner, West Coast Bureau Chief, Light Reading, 4/28/2016
    WiCipedia: Woman Cards & Bitch Switches
    Sarah Thomas, Director, Women in Comms, 4/29/2016
    Sprint CEO: Our Spectrum Is for 5G
    Dan Jones, Mobile Editor, 5/3/2016
    Amazon & Other 'Big 4' Cloud Providers Crushing Competitors
    Mitch Wagner, West Coast Bureau Chief, Light Reading, 4/29/2016
    Like Us on Facebook
    Twitter Feed
    BETWEEN THE CEOs - Executive Interviews
    In this latest installment of the CEO Chat series, Craig Labovitz, co-founder and CEO of Deepfield, sits down with Light Reading's Steve Saunders in Light Reading's New York City office to discuss how Deepfield fits in with the big data trend and more.
    Grant van Rooyen, president and CEO of Cologix, sits down with Steve Saunders, founder and CEO of Light Reading, in the vendor's New Jersey facility to offer an inside look at the company's success story and discuss the importance of security in the telecom industry.
    Animals with Phones
    Sloth Mail Click Here
    Sloth mail -- somehow even slower than snail mail.
    Live Digital Audio

    Of all the tech companies in the Valley, Intel has made the most aggressive commitment to building a diverse and inclusive workplace culture. It's doing so by taking concrete, measurable steps, making a large financial investment and through a commitment to complete transparency about its progress. In this radio show, WiC Director Sarah Thomas will be joined by Shlomit Weiss, Intel's Vice President, Data Center Group, and General Manager of Networking Engineering, who will share with us why Intel is tackling this huge challenge, how and to what effect. She will also discuss her unique experiences leading development of Client SOC development in the past and today leading development of all of the chipmaker's silicon hardware for networking IPs and discrete devices and managing a team of 600 engineers across Israel, Europe and the US.