Verso Buys Verilink for $5.8 Million

The VOIP softswitch company Verso Technologies Inc. (Nasdaq: VRSO) said Monday it acquired the broadband access equipment portfolio of Verilink Corp. and its Larscom subsidiary for $5.8 million in stock. (See Verso's Extreme Makeover.)

Verilink, which entered bankruptcy April 10, sold integrated access devices, optical Ethernet access products, wireless access devices, and bandwidth aggregation technology. Verilink says it sold these products to service providers, enterprises, and OEMs.

Verso bought the Verilink assets from SCS Fund, which bought Verilink out of bankruptcy on June 15 for approximately $5.25 million.

Verso says it will add some of the Verilink products to its portfolio, which now includes prepaid calling administration systems, softswitches, and SIP gateways.

Verso spokesman Manish Bahl says his company will discontinue some of the less profitable Verilink product lines, but no decisions have been made on which ones and when.

Verilink’s customer roster played heavily in Verso’s decision to buy, Bahl says. Verilink has customer relationships with Verizon Communications Inc. (NYSE: VZ), SBC before it became AT&T Inc. (NYSE: T), and MCI LLC before its merger with Verizon Communications Inc. (NYSE: VZ).

“This was a great deal for us; we bought the company at what we thought were bargain basement prices,” Bahl says.

With its Verilink acquisition Verso also buys into a distributor relationship with Lucent Technologies Inc. (NYSE: LU).

Verso says Verilink’s managed service business generates about $2 million per quarter. “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," sums up Verso CEO Monty Bannerman in a release.

Verso’s shareholders seem to like the deal, too. The stock finished the trading day Monday up 11 cents (10.89 percent) at $1.12 per share. (See Verso Restructures Debt.) In tandem with the acquisition, Verso issued 2.9 million shares of common stock and a batch of preferred stock that is convertible to another 2.9 million shares of common stock.

Judging from its numbers, and its decidedly poor visibility in VOIP circles, Verso needs to make some moves. According to Semiconductor Businesses Association (SBA) documents, the company has a history of losses, including net losses of $20.1 million in the 2005 fiscal year, $38 million in 2004, and $18.3 million in 2003. As of March 31 the company had an accumulated deficit of $336.9 million.

Verso entered the VOIP business by acquiring Clarent's softswitch and network optimization products in the first quarter of 2003. In March 2005 the company acquired WSECI and its IMaster pre-paid calling platform.

Verso is based in Atlanta and employs roughly 260 people. Verilink is based in Centennial, Colo., and employed more than 100 people at the time of the sale.

— Mark Sullivan, Reporter, Light Reading