Did Calix Get a Bargain on Occam?
Between upcoming American Recovery and Reinvestment Act (ARRA) windfalls and a general feeling that Occam was undervalued, there's even some belief that Occam should have held out for more. (See Calix CEO Claims Occam for Its Ethernet and Calix-Occam Surprises.)
"They were paying for what they think is going to be Occam's share from flow-through from the stimulus project," says Jeff Heynen, an analyst with Infonetics Research Inc. "That isn't going to be overnight. It could be out to 2013. In my back-of-the-envelope calculation, Occam could gain $100 million through stimulus projects."
Calix's $171 million cash and stock offer on Thursday was about 46 percent higher than Occam's previous closing level. But it doesn't look so large when you consider analysts expect Occam to report revenues of about $113 million for 2011, according to Thomson Financial .
A combined Calix/Occam would continue to compete with Adtran Inc. (Nasdaq: ADTN), but analysts don't expect that to change Adtran's life much.
Some, such as Vince Vittore of Yankee Group Research Inc. , didn't feel compelled to get excited about the deal at all: "I got a message from someone on Facebook saying, 'This is huge!' I said, 'Why?' " Vittore says.
Vittore contends Occam serves mostly Tier 3 providers, separate from the Tier 2 market where Adtran and Calix duke it out.
It's possible that the competition for some noteworthy contracts could be affected. Calix supplies CenturyLink Inc. (NYSE: CTL), but not Qwest Communications International Inc. (NYSE: Q). As those companies merge, some more heft could make Calix "a little bit more of a threat" to win that business, says Mike Genovese, an analyst with Soleil Securities Group Inc. Genovese follows Adtran, but not Calix or Occam, and he doesn't consider the Calix/Occam deal to be all that monumental. (See Qwest, CenturyLink Plan $22.4B Marriage.)
Nor would the companies' combined Recovery Act work have much impact on Adtran. "Market share changes in that Tier 3 space are hard to come by," Infonetics' Heynen says. "Maybe they're replacing old Alcatel Litespans or Lucent Stingers and stuff, but it's not like a Tier 3 gets a stimulus award and says, 'We're going to swap out Adtran.' "
— Craig Matsumoto, West Coast Editor, Light Reading