C-COR Extinguishes Lantern
Is it better to burn out, or fade away?
Flickering optical transport vendor Lantern Communications Inc. agreed to sell itself to broadband equipment provider C-COR Corp. (Nasdaq: CCBL) for a price tag under $40 million (see C-Cor Buys Lantern).
The two companies are still finalizing the acquisition's details, but C-COR chairman and CEO David A. Woodle assured analysts and press yesterday that his company will not pay more than two times the revenues it expects Lantern to contribute next year. C-COR says it expects Lantern's products to add about $20 milion in net sales during fiscal year 2005.
The transaction, expected to be a mostly a cash deal, is expected to close before the end of June.
C-COR, which reported about $200.7 million in revenues during fiscal year 2003, is a company that makes most of its money from cable providers, but it is hoping to shake the stigma of being a cable-only vendor. "We are not a cable-centric company; we're a broadband video company," Woodle said yesterday.
The company makes transport gear, cable headend equipment, optical line terminals, and nodes that, in cable networks, convert optical signals to RF signals and vice versa.
Lantern's flagship product was the Metro Packet Switch (MPS), an add/drop multiplexer for Resilient Packet Ring Technology. The MPS was said to be able to plug into a 10 Gig-E, a Wavelength Division Multiplexing (WDM), or a Sonet (Synchronous Optical NETwork) and SDH (Synchronous Digital Hierarchy) network and provide four times the number of services carried per unit of fiber bandwidth.
The two companies make a good match, according to Woodle, because Lantern's gear can be used to upgrade C-COR's aging line of digital-video metro optical transport products, while, at the same time, targeting non-cable carriers that are looking for transport platforms that can handle voice, data, and video traffic.
C-COR is no stranger to mergers and acquisitions. In fact, C-COR acquired its existing digital video products in 2001 when it bought the cable equipment assets of ADC Telecommunications Inc. (Nasdaq: ADCT) for about $25 million in cash.
It's also clear that, save a few engineering staff, Lantern will be gutted. "We've never been a company of companies," said Woodle.
Whatever the case, Lantern urgently needed a buyer. The company once employed more than 100 people and now has fewer than 30. The company had raised $84 million since 2000 in three rounds of funding, making its final sale price laughably low.
Last year, Light Reading sources said that Lantern had shopped itself and been rejected by both NEC Corp. (Nasdaq: NIPNY; Tokyo: 6701) and Ciena Corp. (Nasdaq: CIEN). (See Lantern Flickering? and Ciena Links Up With Luminous.)
Now, at least Lantern's technology will have new life against Optinel Systems, Luminous Networks Inc., and other competitors.
While the combination of Lantern and C-COR makes sense on paper, investors had a tough time digesting the announcement, which was coupled with a quarterly revenue adjustment from C-COR.
C-COR said earlier that it would bring in between $58 million and $60 million in revenues for its third quarter of fiscal 2004. Now it expects revenues of only $58 million to $58.5 million.
The company's shares fell $2.85 (20.14%) to $11.30 in trading on Thursday and they dipped another $0.20 (1.77%) to $11.10 in after-hours trading.
— Phil Harvey, News Editor, Light Reading