Verso Acquires Verilink Assets

Access equipment vendor Verso acquires strategic assets of Verilink from SCS Fund

June 20, 2006

3 Min Read

ATLANTA -- Verso Technologies (NASDAQ: VRSO), a global provider of next generation network solutions, announced today that on June 16, 2006 it acquired a limited liability company that holds the majority of the business assets of Verilink Corporation and Larscom Incorporated, global providers of converged voice and data access equipment and services to carriers and enterprises, from Winslow Asset Group, LLC, an affiliate of SCS Fund, LP. The purchase price of approximately $5.8 million was paid through the issuance of shares of Verso capital stock.

Verilink Corporation, including its subsidiary Larscom Incorporated, has a broad suite of products that are supported by a value-added professional services team. The Verilink product suite includes products that provide access, multiplexing and transport of voice and data services that extend legacy networks as well as next generation converged access solutions that deliver voice, data and video to business customers. These solutions are all supported by a strong revenue-generating professional services team that offers turn-key provisioning, installation, turn-up and ongoing maintenance and support services.

Verilink's technology solutions align well within Verso's product portfolio, specifically with regard to access solutions. The acquisition gives Verso a significant presence in the North American marketplace with established relationships with several Tier-1 customers including Verizon, AT&T/SBC, and MCI. It also provides the company with several important distribution relationships, including Lucent Technologies. Verso plans to integrate and leverage these channels to generate additional sales with Verso's own solutions as well as distributing Verilink products into Verso's international base of customers and distributors. In addition, the Verilink managed service business comes with a recurring revenue stream of approximately $2 million per quarter. This business substantially increases Verso's managed service capabilities domestically and internationally. The company expects that Verilink's acquired business will be cash flow positive on an annual basis. Additionally, Verso will be receiving experienced management, sales and professional services personnel with strong relationships with large carriers in the US and throughout the Americas.

"Verso's ability to acquire the key assets of Verilink was very opportunistic and extremely fortunate," said Steve Odom, executive chairman of the board, Verso Technologies. "The benefits of this acquisition are numerous, including a very strong and synergistic product portfolio relative to Verso's. Specifically, we are adding several major Tier-1 domestic customers, including Verizon, SBC, MCI and AT&T, as well as other large international companies such as Telefonos de Mexico and Optus of Australia. In addition, the company is acquiring a valuable recurring revenue base from the service organization, and a business unit that is already profitable."

"This acquisition is strategic for Verso," said Monty Bannerman, chief executive officer, Verso Technologies. "We expect the Verilink business, through the technology and customer base acquired by us, to be very accretive for Verso shareholders. It gives us a world class managed services business with a powerful reference account, a product portfolio that has a Tier-1 base in the Americas and beyond, customer and distribution relationships that would have taken years to develop, a strong north American sales team and products that we can take to our international markets."

"This was a win-win situation for all parties involved," said Don Slowinski, senior managing partner, SCS Fund, LP. "We believe SCS Fund was able to acquire Verilink's assets for a bargain price. The fund in turn has sold the most strategic assets to Verso for stock, thereby becoming a significant shareholder in the company. We believe that as a result of this transaction, there will be considerable upside for the SCS Fund as an investor in Verso."

Verso Technologies Inc. (Nasdaq: VRSO)

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