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Optical/IP

ECI On Target as Acquisition Nears

ECI Telecom Ltd. confirmed today that it didn't receive any alternative takeover bids by last night's deadline, and presented its prospective new private equity owners with a solid set of second-quarter numbers that showed growth in its two main markets, broadband access and optical gear. (See ECI Increases Q2 Profit.)

As expected, the group of private equity suitors led by Swarth Investments LLC that agreed to a $1.2 billion takeover of ECI on July 2 is alone in bidding for the company -– the deadline for any alternative bids passed at midnight. (See No New Bidders for ECI and ECI Bought Out in $1.2B Deal.)

Now shareholders will vote on the proposed takeover at a meeting to be held on August 29. ECI "currently expects the closing to take place in the fall of 2007. The closing of the transaction is subject to shareholder approval, certain regulatory approvals and other customary closing conditions," the firm stated today.

The company goes into that shareholder meeting without any notable second-quarter financial concerns. It reported revenues for the three months to June 30 of $164 million and GAAP net income of $24.8 million, or $0.20 per share.

That GAAP net income figure, though, includes a number of adjustments and one-off items, such as the gain from selling Veraz Networks Inc. (Nasdaq: VRAZ) shares in that softswitch vendor's IPO. (See Veraz IPO Comes in Low.)

Without those items, ECI's non GAAP net income for the quarter was $10.6 million, or 9 cents per share, which matched analysts' expectations.

ECI generated $109 million in revenues from its Transport Networking (optical and data equipment) division, an increase of 15 percent from a year ago, and $4 million better than the first quarter. The division has now reported 16 consecutive quarters of revenue growth, as demand for optical equipment continues to grow. (See Optical Gains 11% and Optics Reaching $8B.)

The Broadband Access division, which delivers variable quarterly revenues due to its reliance on bulk DSLAM orders from a small number of Tier 1 carrier customers, reported $50 million in revenues, down from $66 million a year ago but $5 million better than the first quarter. ECI noted "healthy demand from the Division's two principal customers," which are Orange (NYSE: FTE) and Deutsche Telekom AG (NYSE: DT). (See DT Delays Hit ECI Revenues and ECI Drops Despite VDSL2 Coup .)

ECI's share price closed Tuesday at $9.33. The company is holding an earnings conference call at 8:30 a.m. New York time today.

— Ray Le Maistre, International News Editor, Light Reading

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