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Andrew Buys Antenna Maker

Base station vendor Andrew today revealed plans to acquire EMS Wireless -- a designer of antennas and repeaters used by major cellular operators in the U.S. -- for $50.5 million in cash.

Andrew, which called off a planned merger with ADC (Nasdaq: ADCT) in August, says that the buyout will "slightly" add to its earnings in fiscal 2007. The Westchester, Ill.-based firm recently reported a quarterly loss of $59.7 million for its fiscal fourth quarter, compared to a profit of $7.5 million the year before.

"EMS Wireless will strengthen our relationships with key customers and extend our leadership position in wireless subsystems," said John DeSana, group president of the antenna and cable products segment for Andrew Corporation, in a statement.

A division of EMS Technologies Inc. (Nasdaq: ELMG), EMS Wireless had revenues of $28.5 million for the first half of 2006. It employs around 200 people in Norcross, GA., and Curitiba, Brazil. The buyout is expected to be completed within 30 to 60 days.

Consolidation has been tearing through the RF subsystems sector over the past few years, with smaller players getting picked up by either Andrew or Powerwave Technologies Inc. (Nasdaq: PWAV). This buyout continues that trend.

It's getting more difficult to be a smaller player in the base station market, notes Unstrung Insider chief analyst, Gabriel Brown: "Overall the outlook for the third-party RF subsystem suppliers is pretty tough. They’ve always had to compete against the in-house teams at the major equipment vendors, and the recent consolidation in that sector is going to have a massive, knock-on impact on the supply chain." (See Vendor M&A Frenzy: What Happens Next and Size Matters in 3G Wireless.)

On the positive side, Brown sees new opportunities for these subsystem or "module" vendors in the cellular equipment market, as internal base-station interfaces become standardized. (See 3G Base Station Design & Wireless Network Economics and Cutting Costs in Wireless Networks.)

Another growth area is in-building coverage systems to support the rollout of 3G services. "We anticipate accelerating demand for fiber-fed distributed antenna systems, as well as RF repeater and picocell products as carriers seek to improve the quality of service they can offer to enterprise customers," Brown adds. (See In-building Cellular: Selling the Great Indoors and From Closed to Open Mobile Networks.)

— Dan Jones, Site Editor, Unstrung

gmcelroy 12/5/2012 | 3:35:50 AM
re: Andrew Buys Antenna Maker I read Dan Adams article dated 11/2 regarding Andrews purchasing EMS Wireless and that the smaller players in this sector are going to have a difficult time surviving the telecom consolidation efforts now ongoing. It appears that Andrews and Powerwave seem to be emerging as the key players in this market.

Both Andrews and Powerwave seem to be having a horrible year. However, I would have to say that
Powerwave is getting hit the worst seeing its quarterly revenue decline nearly 40-50% in the past few quarters. Given that Powerwave has recently absorbed Filtronics PLC's wireless infrastructure division and it's market cap in only $700M, do you think that we will be further consolidation with these large entities? For example Andrews or ADC attempting to acquire PWAV?

Also, will 2007 be a better year for these RF subsystem players?

Thanks much
joset01 12/5/2012 | 3:35:48 AM
re: Andrew Buys Antenna Maker I'll defer to my colleague Gabriel Brown on these questions as he's the expert in this field.

Thanks

Dan Jones
IPobserver 12/5/2012 | 3:35:47 AM
re: Andrew Buys Antenna Maker For what itGÇÖs worthGǪ

People I speak to generally agree that:

* Life is tough for third-party subsystems vendors & recent consolidation in the OEM base will make life tougher still (the stock charts tell you this)

* Operators appear more comfortable dealing with a prime contractor (major OEM) than with multiple suppliers. Even in the U.S., where mobile operators are technically very competent, there appears to be a shift towards this model.

* Price pressure on wireless equipment is well documented, and each time an OEM wins one of these huge contracts in, say, India, they have to push through the new low price to the supplier base.

There are some potential positives from industry consolidation. For example:

* As new, merged vendors rationalize their products, it may make sense to outsource, say, integrated RF Heads for a particular region.

* Integration of product lines may force vendors to adopt standard interfaces, such as defined by OBSAI. This may make it easier for OEMs to decide to use a third-party module.
gmcelroy 12/5/2012 | 3:35:46 AM
re: Andrew Buys Antenna Maker Thanks Mr. Brown

FYI, I am writing a college paper regarding RF
Subsystem industry and appreciate your feedback.

One last question, do you see this sector bottoming out here (4Q06)?. Will we see a recovery in 2007? or 2008?

Thanks again
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