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Calix Gets More Funding

Calix Inc. (NYSE: CALX) bagged a $57.5 million funding round during the second quarter from Credit Suisse , Foundation Capital , and TeleSoft Partners , according to information released by PricewaterhouseCoopers International and the National Venture Capital Association .

This seventh round of funding comes on top of a reported $250 million that the company has raised since being founded in 1999. Calix did acknowledge getting some funding in the second quarter, but wouldn't divulge any details.

"Given the quality of investors and the size of the investment, I expect an IPO or an acquisition within a year," says Infonetics founder and principal analyst Michael Howard.

Others aren't so sure. "Speculation for the last several months has been that Calix would go public, but that runs contrary to what [CEO Carl] Russo says," notes Current Analysis senior analyst Erik Keith.

Keith says that Russo frequently lauds the competitive advantages of running a private company. In a 2005 interview with Light Reading, Russo said: "If you're public, your numbers are in public, your business model is public. I love quarterly reports because you get a chance to see how your competitors are doing. I'd much prefer them not to see how we're doing." (See Full Transcript of LRTV’s Interview With Carl Russo, CEO, Calix .)

If Calix were using the funds to look at acquisitions, Ethernet-over-copper startup Aktino Inc. is a possible target. The two companies already partner and a combined company might fare better against larger access players such as Adtran Inc. (Nasdaq: ADTN) and Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA). (See Aktino Lands Calix Partnership.)

Current Analysis's Keith says buying Aktino would give Calix access to Tier 1 customers where it doesn't currently have business. Aktino, he points out, is "gaining traction at AT&T," while Calix has yet to score an RBOC customer. (See AT&T Sets Copper Ethernet Course.)

But the M&A angle has its critics, too. Jeff Heynen of Infonetics says "a lot of people made a bigger deal out of [the Atkino deal] than it actually was." He says the partnership was little more than a "pragmatic business decision to solve an application problem."

Heynen's read on the funding is less scintilating. "I think it's more for product ramp-up and increasing their sales force," he says. "If you look at who's entering the space and who they're going to compete with, they're going to need to expand."

— Ryan Lawler, Reporter, Light Reading

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paolo.franzoi 12/5/2012 | 3:43:27 PM
re: Calix Gets More Funding
You don't value the acquiring firm unless they are paying with stock. As to the $1B valuation, that is what Calix wants for a buyout. And has wanted for several years with no buyer.

seven
mocelet 12/5/2012 | 3:43:27 PM
re: Calix Gets More Funding Any word on the valuation?

Heard rumors that valuation was around $500-600mil even though company was valued closed to $1bil during OSI acquisition.

net-hed 12/5/2012 | 3:43:26 PM
re: Calix Gets More Funding Why are we talking about a year-old funding round all of a sudden?
mocelet 12/5/2012 | 3:43:26 PM
re: Calix Gets More Funding
calix transfered certain amount of stocks to acquire osi. how did they decide how many shares to issue for osi? based on valuations of osi and calix at the time of the acquisition. what i heard was that calix issued enough shares valued at $1bil/shares_outstanding to cover osi's valuation.

rumor i heard was that calix' latest round was valuing the company significantly lower than the valuation during osi acquisition.

any thoughts?
paolo.franzoi 12/5/2012 | 3:43:26 PM
re: Calix Gets More Funding
OSI's shareholders were idiots to accept a $1B valuation?

There is a thought.

Unless you know something the rest of us don't

"The two companies declined to detail the terms of the acquisition such as the value of the deal, when it is expected to close and whether any organizational changes will result."

seven
bollocks187 12/5/2012 | 3:43:22 PM
re: Calix Gets More Funding Seven,

"They could be running in a cash flow negative situation again."

Without a doubt.

"1 - Their Tier 2 business is thought to be down a bit this year."

The product does not have the right basic features for new services market - hence the departure of the Marketing guy.


"2 - They have already lost the Tier 3 momentum to Occam."

Exactly and Occam is more nimble and less bloated than Calix.

"3 - They have a pretty poor FTTP story."

They have BS many customers on when they would fix the problem. 2.5G GPON promoted 2 years ago.
I thought this is why the bought the optical company ?

"4 - The new IP product has failed miserably and they are having to start it over again."

Took them over 3 years to get their first IP card out. I heard the India outsourcing was a disaster. They have no talent for IP as most of the senior engineering folks are all TDM DLC people.

"5 - Their new engineering staff (several went to Cyan Optics) are being put on "part time" status to save money."

Mike has been steadily picking them up for his 40G packet optical switch networking processor super dudaddy. He is kinda bumped he got ousted - again by the same guy. This will be his 3 attempt at trying to make the grade as a CEO - he will make it this time !

"They have a real business, but it is margin challenged and has many competitive pressures. A pretty widely held view is that they have topped out and are entering a period of slow decline."

Carls distinct character, likes Mikes before him, has smoothed the potential real success of the company. Thats the problme with CEO who are not hungry for success but are all about their own egos. Not sure the low selling price and low margin works on an overdesigned TDM DLC in a competitive IOC market.


"From the acquisition front, how does a Calix acquisition help anybody at an RBOC? RBOCs prefer large vendors."

It does not help anyone except the investors of Calix. Lots of the folks want out of there and are looking for something new.

--------------Fact not Fiction
mocelet 12/5/2012 | 3:43:22 PM
re: Calix Gets More Funding i was looking for some comparable valuations in access equip. segment and couldn't find much data on calix' valuation, hence the question.t



mocelet 12/5/2012 | 3:43:20 PM
re: Calix Gets More Funding good points. sounds like you don't see much growth opportunities in calix due to company related issues.

do you think tier-2 market is growing? if yes, i wonder if things could be different with a better management, better market focus, right product, etc.

one thing still puzzles me though is why investors would give another 50mil for a company with an exit at max $1bil (assuming 2-4x multiple). i can see that investors might be in for a quick exit with lower money multiples (1-3x of their money) and keep their returns high. But with this market i can't imagine them going ipo in the next 12months.
paolo.franzoi 12/5/2012 | 3:43:19 PM
re: Calix Gets More Funding
To answer that question:

1 - Check out AFC over the years before the Tellabs buyout.

2 - Check out Occam.

3 - Check out DSC with its big chunk of Litespan revenue before the Alcatel buyout.

Without the Cerent windfall AFC was basically never worth $1B and had more revenue and profit than Calix ever has had. At the time of the Tellabs buyout, the enterprise value of AFC was closer to $700M (give or take).

seven
bollocks187 12/5/2012 | 3:43:18 PM
re: Calix Gets More Funding The bigest problem with access vednors is they have tanked the prices to compete in a shrinking market space. This has led to shrinking margins. Wave7 is an example of to many players in this space bought for 10Million!

Calix is worth 1xrevenue Maximum.
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