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A PON in the GameA PON in the Game

A closer look at a BPON bargain

Phil Harvey

June 12, 2007

3 Min Read
A PON in the Game

3:15 PM –- From The Philter's PON-derous findings file: Did you ever wonder how an ODM called TXP Corp. (Nasdaq: TXPO) ended up with Siemens AG (NYSE: SI; Frankfurt: SIE)'s BPON and GPON ONT business unit? (See Siemens Sells ONT Biz.)

Here's how: Siemens pretty much gave the business away in exchange for royalties on future products, while keeping the core technology out of competitors' hands. The details of the deal were hidden in plain sight recently, as TXP notes in its annual report:

In November of 2006, TXP completed a reciprocal exchange transaction with Siemens Networks GmbH Co. pursuant to a Transfer and License Agreement executed by both TXP and Siemens. TXP received the following as a result of the exchange:

  • Component inventory intended for the manufacture of Optical Network Terminals

  • Fixed assets including technical equipment, machinery, tooling used in the design of ONT products and related operational software;

  • Computer servers, personal computers, and computer peripherals; and

  • Siemens granted TXP non-exclusive, non-transferable and non-sub licensable right and license to use, modify or otherwise deploy documents, data, software code related to the ONT business. Siemens granted TXP non-exclusive, non-transferable and non-sub licensable right and license under the pertinent patents related to the ONT business.

So Siemens traded its BPON/GPON ONT business unit away for points on future products sold. But how much money are we talking about? Keep reading:

TXP is obligated to pay Siemens royalties for the rights and licenses related to BPON and GPON ONT's granted to TXP by Siemens pursuant to the Transfer and License agreement.

TXP's fee to Siemens is either 2.5 percent or 5 percent of any revenues generated from BPON or GPON products sold, depending on when the product development was finished. In short, TXP pays the lesser amount if the product sold is deemed to be a "variant" of what it originally got from Siemens.

The filings state Siemens will keep getting royalties for "a period of three years or $20 million, whichever comes first."

When the deal was first signed, Siemens put the onus on TXP (well, its former staff) to finish a GPON product design by January 2007. On paper, TXP deems the business unit to be worth about $1.3 million -- an amount roughly equal to the four months of salaries TXP paid to finish the GPON design and, by way of the Siemens' agreement, keep the business unit.

TXP, which also has a business retrofitting telco cabinets, is suddenly on our radar in the race to make an ONT design that several vendors can use. There's skepticism surrounding the whole issue of ONT interoperability, so this should be fun.

But, on the strength of Siemens' castoffs, TXP says it's getting interest from major equipment makers, though nothing is out on the market at the moment. (See TXP Signs OEM and TXP Ships Parts.) For Siemens, it's hard to tell if they're in for big royalties or wreckage.

— Phil Harvey, Managing Editor, Light Reading

About the Author(s)

Phil Harvey

Editor-in-Chief, Light Reading, Light Reading

Phil Harvey has been a Light Reading writer and editor for more than 18 years combined. He began his second tour as the site's chief editor in April 2020.

His interest in speed and scale means he often covers optical networking and the unsung technologies powering the modern Internet.

Harvey covered networking, Internet infrastructure and dot-com mania in the late 90s for Silicon Valley magazines like UPSIDE and Red Herring before joining Light Reading (for the first time) in late 2000. After moving to the Republic of Texas, Harvey spent eight years as a contributing tech writer for D CEO magazine, producing one-off columns about everything from supercomputing startups to nanotech discoveries. Those columns aged about as well as an open carton of milk on hell's front porch.

Harvey is an avid photographer and camera collector – if compulsive shopping and "collecting" are the same thing. His work can be seen by opening one of the dozen dusty shoe boxes in his attic and bedroom closet. "Don't wake up the gray cat," is his advice to art curators of the future.

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