Calix CEO Claims Occam for Its Ethernet

Carl Russo says purchase will accelerate company's move into Ethernet and may help international expansion as well

September 16, 2010

3 Min Read
Calix CEO Claims Occam for Its Ethernet

Calix Inc. (NYSE: CALX) is paying a 40 percent-plus premium for Occam Networks Inc. (Nasdaq: OCNW) in order to acquire its Ethernet access expertise and accelerate Calix's move both into active Ethernet fiber access and into the international market, according to Calix president and CEO Carl Russo. (See Calix Buys Occam for $171M.)

Speaking to analysts today, Russo compared the move to Calix's 2005 purchase of GPON vendor Optical Solutions, which he said enabled his company to move quickly into optical access, a major market for Calix today. Russo said the talent acquired then continues to propel optical product development within Calix. (See Calix to Buy OSI.) "First and foremost, this is about the most deeply experienced Ethernet access team in the business," Russo said. "Occam was the early pioneer of bringing pure Ethernet solutions to the access infrastructure -- they've been at it for over 10 years now. The No. 1 strategic rationale is that, and so we believe it will accelerate all of our plans across a unified access portfolio, especially the Ethernet side."

Active Ethernet is growing in popularity as an alternative to GPONs for all-fiber access, particularly among smaller service providers who are using it on "home-run" fiber-to-the-premises deployments. It's also popular internationally, where Calix wants to pursue significant growth. Active Ethernet only becomes more important as wireless backhaul becomes a significant driver of local loop fiber.

Calix already makes an optical network terminal (ONT) that is used in Ethernet deployments because of its ability to autodetect whether the incoming signal is GPON or Ethernet. It's also been making a major push into Ethernet, going head-to-head with Occam and other Ethernet access vendors such as Adtran Inc. (Nasdaq: ADTN). (See Calix Broadens Fiber Access Menu and Calix Claims Ethernet Momentum.)

The Occam BLC product will be brought into the Calix family of C-series and E-series products as a new B-series, and will be integrated into the Calix Management System (CMS), Russo said. That will quickly get Calix into the Active Ethernet world.

Integrating the products will "let us do what we do well, like Ethernet and VoIP, and add value to their portfolio," said Russ Sharer, vice president of marketing for Occam. "Together, we can go farther faster."

Occam has a slightly larger international footprint than Calix in terms of places where its products are deployed, but even so, Occam chairman Bob Howard Anderson admitted its international revenues are not significant. Occam today has products deployed in Guam and Australia, and some early developments in Europe and the Middle East.

Calix began its international push in the last couple of years in the Caribbean and Latin America. (See Calix Goes Caribbean.)

Russo is not expecting a major sales boom, as he projected more than $400 million in revenues for the combined companies next year. Separately the companies were projecting $333 million (Calix) and $114 million (Occam). But he also told analysts the deal would be 30 percent to 35 percent accretive to the current projections for Calix earnings of 60 cents a share for 2011.

Being a company of greater bulk also will position Calix to sell to larger service providers, Sharer said, and that becomes important for selling to wireline operators internationally, and as the wireless backhaul market takes off and fiber deployments are used to deliver wireless backhaul.

— Carol Wilson, Chief Editor, Events, Light Reading

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