Ethernet equipment

Overture & Hatteras Gang Up on Carrier Ethernet

Carrier Ethernet specialists Overture Networks Inc. and Hatteras Networks Inc. are merging to create what they're hoping will be a Carrier Ethernet powerhouse.

Terms aren't being disclosed. The companies aren't even saying if the transaction is in cash, stock or both. They expect the deal to close in two or three weeks.

The combined company would be called Overture, and Overture CEO Jeff Reedy would remain chief executive of the combined company, with Hatteras CEO Kevin Sheehan becoming president.

Why this matters
It's hard not to see this as a step toward a hoped-for IPO. In announcing the merger to the press on a Tuesday conference call, Reedy and Sheehan emphasized repeatedly that the strongly growing market was the impetus for the merger, especially as customers kept wishing aloud that either company sold a few more products. Also, both companies are about a decade old and investors have had a long wait for an exit as neither firm, to date, has made a go at the public markets.

They weren't likely to get to that point quickly as separate companies, either. Carrier Ethernet is a growing market, but sales of Ethernet access devices were around $750 million in 2009, according to Infonetics Research Inc. While the Overture/Hatteras combo will probably be the market-share leader in 2010's numbers (which Infonetics hasn't completed yet), their combined revenues -- $60 million to $80 million, Infonetics analyst Michael Howard estimates -- don't translate into a dominating market share.

("You may have underestimated us," Overture's Reedy replied when Howard mentioned his estimate during the conference call.)

It's true, though, that the companies' products don't overlap. Hatteras has focused mostly on bonded-copper interfaces for the edge network, while Overture has been more of an Ethernet-over-TDM play. "They are the most complementary product lines of any merger I've ever seen," Howard tells Light Reading.

For more
Both companies are about 10 years old, so they've been on the radar for a while. Here's the latest on each:

— Craig Matsumoto, West Coast Editor, Light Reading

chris_actelis 12/5/2012 | 5:11:32 PM
re: Overture & Hatteras Gang Up on Carrier Ethernet

Craig, you’re spot on as usual. For both 2008 and 2009 EFM bonded-copper EADs (Ethernet Access Devices), Actelis had a substantial lead in the market, according to Infonetics Research. Read More>  Additionally, Frost & Sullivan has ranked Actelis #1 since 2007.

Pete Baldwin 12/5/2012 | 5:11:32 PM
re: Overture & Hatteras Gang Up on Carrier Ethernet

The Hatteras and Overture *main* products don't overlap, but ... there must be corners of overlap somewhere in there. Both of them have gotten into fiber-based products, for instance; if I look at those products, would they look more similar?

Someone's pointed out that both companies do Ethernet-over-TDM, too.

Separately, about market share: Both companies call themselves No.1 in their respective markets, but Michael Howard points out that Actelis, not Hatteras, was No. 1 in bonded copper in 2009. He doesn't have the 2010 numbers done yet, so it's possible Hatteras overtook them.

DCITDave 12/5/2012 | 5:11:30 PM
re: Overture & Hatteras Gang Up on Carrier Ethernet

It's a fair question:


stanhubbard 12/5/2012 | 5:11:27 PM
re: Overture & Hatteras Gang Up on Carrier Ethernet

On Wednesday of this week, Heavy Reading is publishing our Carrier Ethernet Access Platform (CEAP) Quarterly Market Tracker, which has market share estimates for (1) Ethernet-over-fiber access switches/demarcation platforms; (2) Ethernet-over-TDM access circuit platforms; and (3) Ethernet-over-bonded copper pair platforms. Anyone interested in learning more about the Tracker can contact me at [email protected].

The estimated combined revenues of Overture + Hatteras create a CEAP market leader with significantly higher sales than the range mentioned in the above article. I think the combination makes a lot of sense from a portfolio point of view, a customer mix point of view, and a geographic market penetration point of view.

There is some overlap in terms of the Ethernet-over-TDM access capability on the Overture platforms and the Hatteras 6100 (combination of E-o-TDM access + E-o-bonded copper), but there's no E-o-bonded copper or E-o-fiber access overlap. Overture has had E-o-fiber access platforms, but Hatteras hasn't yet rolled out that capability on its multiservice platform on a GA basis.

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