Putting a difficult 2016 behind it, embedded computing system specialist Kontron has agreed to a strategic merger that expands its portfolio, improves its supply chain options and gives it greater financial heft.
The company, which develops and supplies commercial off-the-shelf (COTS) integrated network appliances that support data, IoT and NFV applications, is to merge with, and become a unit of, IT systems develop and supplier S&T Deutschland Holding AG, its biggest single shareholder with a near 30% stake. (See Kontron, S&T Merge, Kontron on Universal OpenStack-Based Virtualized Services and Kontron, Canonical Team on Integrated OpenStack Platform.)
The move gives Kontron, which will retain its brand name once the deal has closed, access to a broader range of complementary software and supporting services, as well as access to the manufacturing facilities of Foxconn subsidiary Ennoconn.
Combined, the merger partners expect 2017 revenues to be in the range of 860-890 million ($981-$1,015 million) and to hit the 1 billion ($1.14 billion) mark in 2018.
The merger agreement follows a return to profitability for Kontron AG in the first quarter, during which it generated revenues of 92.4 million ($105.4 million), up slightly from a year earlier, and earnings before interest and tax (EBIT) of 2.2 million ($2.5 million) compared with a loss of 6.1 million ($7 million) a year earlier.
Kontron, which competes with the likes of Advantech and Radisys, had a very rough 2016, during which its revenues plummeted by almost 18% year-on-year to 385.1 million ($440 million), its gross margins shrank from 26.1% to 14.6% and it reported an EBIT loss of 141.7 million ($161.7 million).
While the company's Industrial and Avionics/Transportation/Defense units suffered greater declines, full year 2016 revenues at the Communications unit shrank by nearly 15% to 90.1 million ($102.8 million).
In July 2016, Kontron dismissed Rolf Schwirz as CEO and replaced him with board member Sten Daugaard. He subsequently gave way in December 2016 to current CEO Hannes Niederhauser.
Ray Le Maistre, , International Group Editor, Light Reading
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