The inside story of Casa's rise and fall in 5G

Roughly a decade ago, Casa Systems believed it had found a path to growth in wireless. The company, a longtime player in the cable industry, hoped to entice new wireless customers with a combination of software virtualization and cloud computing.

It made sense. Many wireless network operators, having navigated the transition from 4G to 5G, today boast of their virtualized, cloud-based software operations.

Casa ultimately invested around $130 million into its wireless ambitions.

But the investment didn't pay off. Amid pandemic-era supply constraints, heated competition from bigger rivals and a slowdown in customer spending, Casa recently agreed to sell its wireless business for just $15 million as part of a court-supervised Chapter 11 bankruptcy sale process.

The cash will be used to finance the wind-down of Casa's other operations, including its cable and fixed wireless businesses.

This is the story of Casa's journey into wireless and how the company's big ambitions waned in the harsh light of reality. The narrative that follows has been assembled from company announcements, interviews with employees and Casa's lengthy bankruptcy filings.

The newcomer

Casa Systems unveiled its first wireless products in 2016 during the MWC Barcelona trade show, the global wireless industry's premier event. At the time, Casa boasted of its virtualized edge platform called Axyom and its low-power small cell product, Apex.

"Casa uniquely addresses the challenges of this new era, bringing its proven, decade-long expertise delivering tier one cable access technologies to its new ultra-broadband edge platform and small cell solutions," said the company in a press release at the time.

"When the market had traditionally relied on network architecture that was closely connected to underlying hardware, the company foresaw the impending architectural shift toward the virtualization and disaggregation of networks and acted accordingly," explained Casa's current CFO, Edward Durkin, in the company's recent bankruptcy filings.

Casa's 2016 launch eventually grew into a sprawling infrastructure operation that touched on everything from the Internet of Things (IoT) to broadband gateways, fixed wireless access (FWA), core network operations and edge computing. Internally, "Casa access devices" (CAD) refers to the company's fixed wireless, fiber and IoT operations. "Cloud" refers to Casa's cloud-native software portfolio, and the company's small cells sit in its "radio access networks" (RAN) business. "Cable" is Casa's legacy business in that industry. 

Thus, Casa competed not only against big cable vendors but also big mobile vendors like Huawei, Ericsson, CommScope and Nokia, as well as newer players in the wireless space like Microsoft and Mavenir.

Casa was hoping to capitalize on a convergence between its legacy cable customers and its newer wireless customers (like AT&T and Verizon). Indeed, in 2019 Casa introduced a core network technology designed to allow customers to use telecom services seamlessly as they moved between mobile and fixed connectivity.

That convergence is now happening: Cable companies have become big players in the wireless industry, while wireless companies are selling home Internet services. But it's mostly happening without Casa.

Expansion mode

After jumping into the wireless industry with an edge/core platform coupled with small cells in 2016, Casa began looking for ways to expand quickly.

By 2019 Casa decided FWA would be its path to growth. The company announced it would acquire Australian fixed wireless networking vendor NetComm for $115 million. NetComm's two main customers then were NBN in Australia and AT&T in the US.

At the time, the move made sense. Verizon was in the early stages of its fixed wireless network buildout. And T-Mobile was working to close a purchase of Sprint that would give T-Mobile the spectrum resources to eventually grow into one of the nation's biggest Internet service providers.

In subsequent years, Casa doubled down on the FWA opportunity, expanding its products into spectrum bands including 3.5GHz CBRS and millimeter wave.

By some measures, the strategy worked. At the beginning of 2021, wireless eclipsed cable as Casa's biggest business. At the time, Casa counted 28 wireless customers worldwide. 

The Verizon deal

Perhaps Casa's most noteworthy win in the wireless industry was Verizon.

In April 2022, Verizon bought 9.9% of Casa's equity for almost $40 million. As part of that deal, Casa agreed to provide Verizon with multi-access edge computing (MEC) services that would essentially allow enterprise customers to put a version of Verizon's core network directly onto their corporate campus. Doing so would allow Verizon to sell secure private wireless networking services coupled with on-premise edge computing functions.

"Casa Systems is excited to be at the forefront of this shift towards a cutting edge, cloud-based strategy through this partnership with Verizon," Jerry Guo, Casa's founder and CEO, said at the time.

Indeed, the agreement seemed to sit on top of several emerging trends in the wireless industry, including virtualized core systems, private wireless networking and edge computing. Verizon itself had jumped into edge computing with both feet via a major agreement with AWS in 2019, with the goal of building dozens of edge computing sites all over the US.

But by early 2023 there were already signs that the market wasn't developing as Casa had hoped.

"The mobile edge compute and private 5G networks ... the adoption curve [is] a little slower than maybe we would like," explained Verizon's former CFO, Matt Ellis, in January 2023.

"Nobody is happy with the acceleration of private networks," Casa's new CEO, Michael Glickman, told Light Reading recently.

Warning signs

Throughout 2021 and 2022, Casa "experienced shipping bottlenecks and shortages of supply that resulted in an inability to fulfill certain customer orders within normal lead times," Durkin said in the company's bankruptcy filings. "This adversely impacted the company's revenue and operating results for fiscal years 2021 and 2022."

Durkin added: "In connection with the foregoing, the company also experienced significant increases in shipping costs. Given these supply chain delays, the company heavily invested in inventory, particularly Cable and CAD [Casa access devices] hardware, in 2021 and 2022 to meet customer demands and ultimately fulfill expected future sales, which required a significant amount of short-term cash outflows. Shortly thereafter, the Cable market experienced a significant decline ... thus dissipating demand and leaving the company over-inventoried and cash-stretched."

Casa wasn't alone. A wide range of other telecom equipment suppliers complained of similar problems in the early days of the pandemic.

But Casa also lost two big customers over the course of 2022 and into 2023: AT&T and Charter.

The departure of AT&T – coupled with a decline in spending from its other big fixed wireless customer, NBN in Australia – more than halved Casa's fixed wireless business. The company said revenues in that unit dropped from around $200 million annually to just $90 million the year after it acquired NetComm.

But it might have been the loss of Charter that pushed Casa into its spiral. Charter was Casa's largest cable customer, and the loss of the operator's business was devastating. Casa calculated Charter would have accounted for up to $32 million in earnings in 2023, $47 million in 2024, and $57 million in 2025.

New management, new directions

In March 2023, Casa shocked the market by announcing that company founder Jerry Guo would step down as CEO. Charter's decision not to purchase the company's products was a big reason. Indeed, Ernst & Young, Casa's auditor, issued a going-concern qualification in its opinion of the company's annual report.

Casa's new management quickly embarked on a series of cost-cutting moves. In April 2023 Casa cut 134 positions, or 13% of its workforce.

In August 2023, the company sold its headquarters, at 100 Old River Road, Andover, Massachusetts, for $6.4 million.

And the company began putting its businesses on the block. Already Casa had attempted to sell its NetComm fixed wireless operations in early 2022, but in late 2022 it also began shopping its cable operations.

The company's broad goal was to offload its fixed wireless and cable business segments "as it shifted towards a core focus on the Cloud/RAN businesses," according to Durkin.

Meaning, Casa wanted to sell its legacy cable business and its flagging fixed wireless unit in order to prop up its wireless efforts.

Casa said it engaged with dozens of different bidders for the businesses. But the company wasn't able to scare up any substantial bids for either operation after several different sales efforts.

As a result, things got serious in the fall of 2023.

Enter: the advisors

"In October 2023, as the debtors' financial position continued to deteriorate, the debtors decided to explore a wider range of transaction alternatives and engaged Ducera to provide restructuring, financing and transaction advisory services," said David Zubricki, referring to Casa as the "debtor." Zubricki is the managing director at Ducera Partners, an investment banking firm specializing in restructuring for companies, creditors and investors in bankruptcy, according to Casa's bankruptcy filings.

The reason for Zubricki's appointment was clear. Casa's substantial debt made it unable to meet its obligations. As noted by The Wall Street Journal, Casa listed $262 million in assets and $316 million in debt at the end of September 2023, with Verizon and private-equity firm Summit Partners among its biggest investors.

As Casa's financial situation worsened at the end of 2023 and into 2024, the company engaged in a series of debt renegotiations. At times these were happening almost every week.

Amid those efforts, Casa again attempted to sell its cable and fixed wireless business in the fall of 2023. But unlike in past efforts, Casa also started shopping its primary wireless business – the one the company had hoped to cling to during previous efforts to sell the FWA and cable businesses.

"During this time, the debtors ultimately held substantive discussions with more than 26 parties in connection with potential sale transactions and the debtors' management team, along with Ducera, engaged in dozens of diligence sessions and other transaction-related conversations with eight parties which expressed a more significant level of interest and requested such further information," said Ducera's Zubricki. "This formal and informal outreach bore significant fruit."

Casa finally managed to identify some potential suitors.

No money from Verizon

However, just before entering bankruptcy, Casa turned to one of its biggest investors – and one of its biggest customers – for help.

"In January 2024, the company and its restructuring advisors met with key members of Verizon's management team to discuss the treatment of certain existing contracts and a potential additional investment into the company to help facilitate a viable path forward," said Casa's Durkin. "Following the meeting, Verizon ultimately made a payment required under one of its contracts and expressed support for a transaction centered around the transfer of the Cloud and RAN assets to a third-party, assets that are vital to the company and Verizon customer relationship."

But Verizon declined to provide any additional funding into Casa.

"Debtors engaged in several discussions with Verizon, a key customer of the debtors, to solicit, among other things, a potential additional investment into the debtors' estates to help facilitate a viable path forward, as part of a value maximizing in-court or out-of-court transaction," said Zubrinski. "But the debtors and Verizon were ultimately unable to agree to terms for a broader restructuring proposal centered on a potential new money capital injection or debtor-in-possession financing."

Verizon's decision wasn't necessarily a surprise. Like other 5G providers in the US, the service provider has been working to scale down its network spending. Verizon officials have said the company is now beginning to see more interest in sales of its edge computing and private wireless offerings, but the company has acknowledged the business remains in its early stages.

Preparing for bankruptcy

In late March 2024, after failing to regain compliance with Nasdaq's minimum price requirements, Casa Systems received notice that its stock would be delisted on April 5, 2024.

On April 3, 2024, the company officially announced a court-supervised Chapter 11 bankruptcy. Already, in late March 2024, Casa's NetComm-branded fixed wireless business had entered bankruptcy proceedings in Australia, according to SmartCompany.

In its US bankruptcy filing, Casa said Vecima Networks had agreed to purchase its cable business for $20 million, thereby setting a minimum bid for a court-monitored auction of Casa's cable assets. That auction is scheduled to start in May 2024, and already UK-based Technetix told Light Reading it is considering a bid.

As for Casa's wireless business, Lumine Group agreed to purchase it for $15 million. Casa said it received no other substantive bids for the business.

The acquisition of Casa's wireless business is just the latest move for Lumine. During 2023, Lumine acquired telecom messaging company Openwave, network inventory management company RazorFlow, telecom deployment company SpatialNetworX, programmatic ad company WideOrbit, and NetNumbers' Titan.ium business, which focuses on signaling, routing and subscriber data management. 

And, in just the first few months of 2024, Lumine has so far purchased Nokia's device and service management platform business and Synchronoss Technologies' messaging and network logistics businesses.

Now, if it adds Casa to that list, Lumine would be in charge of the MEC portion of Verizon's private wireless networking business.

Casa's sale to Lumine is scheduled to close on April 25, 2024, barring any additional bids. Lumine officials declined to comment on the transaction.