Ethernet equipment

ADVA's Still Shopping

Acquiring Covaro Networks Inc. may not be the end of ADVA Optical Networking's (Frankfurt: ADV) spending spree, according to ADVA's chief marketing and strategy officer Brian McCann. (See ADVA Snaps Up Covaro.)

McCann says that, although Covaro gives ADVA the North American customers and staff it wanted, the company will continue to look at acquisition opportunities in the metro optical Ethernet market. (See ADVA Eyes Movaz, Meriton.)

"We continue to talk to other companies in the optical Ethernet space, and we'll review other opportunities as we continue to seek ways to ramp up our revenues," says McCann.

He adds that some prospective targets have valued themselves out of contention. "Covaro gave us the right value proposition. That has been a stumbling block in some other cases."

Once the acquisition is complete, Covaro will bring about 55 staff, and more than 60 service provider customers. Covaro's VP of marketing, Fred Ellefson, says about "10 percent of those customers are Tier 1 carriers, and we're hoping to announce one of the Tier 1 users in the U.S. in the near future," as well as some business in the Asia/Pacific region.

The acquisition gives ADVA a ready-made position in the Ethernet access market, which is a good place to be right now, reckons Stan Hubbard, senior analyst at Heavy Reading.

"This appears to be a solid move on the part of both players, and it really drives home the point that the Ethernet access market is heating up. Comments from carriers at Light Reading's Ethernet Expo last week and at the Carrier Ethernet World Congress in Berlin a few weeks ago revealed strong interest in the types of platforms that Covaro offers." (See Ethernet Expo: Shop 'Til You Drop and Ethernet Expo: It's Raining Packets.)

Hubbard adds: "ADVA already has been supporting Ethernet services with its Ethernet-over-WDM and FSP 150 Ethernet-in-the-first-mile solutions, and the Covaro acquisition is a nice way to round out its portfolio."

— Ray Le Maistre, International News Editor, Light Reading

digits 12/5/2012 | 2:56:47 AM
re: ADVA's Still Shopping ADVA says many Ethernet vendors are pricing themselves too high. That's probably based on future potential sales once carrier Ethernet really kicks in. Are vendors too greedy, or are they right to hold out for what ADVA believes is a high price?
And which firms might price themselves low enough to attract ADVA's attention?
optiplayer 12/5/2012 | 2:56:46 AM
re: ADVA's Still Shopping If business is so wonderful at Covaro - they claim 60 carrier customer including 6 of the Tier 1 variety - why did the company sell out at a significant discount to capital raised to date?

I believe the most ADVA can pay is $24M for a company that had raised $42M? Something doesn't add up...
Stevery 12/5/2012 | 2:56:46 AM
re: ADVA's Still Shopping ADVA says many Ethernet vendors are pricing themselves too high.

That's funny. Many Ethernet vendors say that ADVA prices them too low.
fiberous 12/5/2012 | 2:56:36 AM
re: ADVA's Still Shopping For companies engaged in emerging markets the
valuation is neither based on revenue multiples
nor capital raised. It is simply the cost + some
premium to buy this as a part of the portfolio
than to slog developing this internally.

Actually, capital raised is a good indication
of the level of stupidity that surrounds
startups. The more they raise the more
dumber they are.

Another issue that has been prominent is the
simplicity of solutions that the old optical
companies deal with.
Most shy away from complex paradigms.
Adva provides optical plumbing and is happy
to compliment its product lines with similar,
less-complex solutions.

From a start up's perspective it is still a
buyers market. There are some boards/VCs who are
hungry and will eventually starve holding on to
an empty silver bowl.
fiber_r_us 12/5/2012 | 2:56:33 AM
re: ADVA's Still Shopping >The more they raise the more dumber they are

Now that was funny!
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