EXFO to Acquire Tester Vendor

EXFO Electro-Optical Engineering Inc. (NASDAQ: EXFO, TSE: EXF) announced today it has entered into an agreement to acquire Avantas Networks Corporation for approximately US$65 million, or US$93 million for the equity minus US$28 million of Avantas cash on hand. Consideration paid consists of approximately 4.4 million EXFO shares and US$36 million in cash.

Avantas, a Montreal-based, pre-revenue company that recently released datacom and telecom testers capable of measuring up to 10 Gb/s systems, is a supplier of leading-edge fiber-optic testing and optical network performance management equipment that supports a wide range of protocols and data transmission rates.

Based on the latest ASIC and FPGA technologies, its portable Service Test Gear (STG) Series products represent the only solution that supports multi- protocols like ATM, SONET, SDH, Gigabit Ethernet and Ethernet, as well as data transmission rates from OC-192 (10 Gb/s) down to DS0 (64 kb/s) in North America and STM-64 (10 Gb/s) down to E0 (64 kb/s) in Europe and abroad, on a single platform. These feature-rich-instruments, with one of the smallest footprints in the industry, test critical network performance parameters.

Avantas' remote optical network performance management system, Network Guardian G2, provides real-time surveillance 24 hours per day, seven days per week. A single administrator can simultaneously observe critical Quality of Service (QoS) parameters at key locations in the network by relying on data from remote Network Guardians. This system is fully complementary to EXFO's remote fiber test system. Similar to EXFO's product portfolio, these product lines are designed for telecommunications carriers, system manufacturers and research labs. "This strategic acquisition enables us to leverage our 16-year leadership in physical layer testing and address the new protocol layer testing requirements emerging with advanced DWDM networks," said Germain Lamonde, Chairman, President and CEO of EXFO. "We will now be able to offer our customers a one-stop solution for all of their fiber-optic testing needs. In fact, we plan to integrate both physical and protocol layer technologies inside our FTB-400 Universal Test System and IQ platform. "Bridging the two technologies inside one box is something the market has been anxiously awaiting for quite some time." This transaction enables EXFO to enter the lucrative fiber-optic protocol layer testing sector and significantly increase its addressable market size. The global fiber-optic protocol layer test equipment market is expected to increase from US$1.6 billion in 2001 to US$3.1 billion in 2005, according to a May 2001 global market study on ATM, SONET and SDH test equipment from Frost and Sullivan, a leading high-tech market research firm. "It's a terrific match between Avantas and EXFO," said Sami Yazdi, Chairman, President and CEO of Avantas. "We are bringing state-of-the-art technology and a leading-edge development team on the protocol layer testing side, while they're delivering strong brand name recognition and a global sales channel. "It's also an ideal fit in terms of culture, product development and management to become industry leaders in our space." EXFO plans to take advantage of Avantas' strong research and development team-60 out of approximately 100 employees are engineers with experience at companies like Nortel Networks, Marconi and Cisco-to quickly gain market share in the protocol layer testing market. The Avantas acquisition has been approved by the board of directors of both companies, but it is subject to regulatory approval and other customary closing conditions. The deal is expected to close by the end of the first quarter of fiscal 2002. The transaction will be accounted for under purchase accounting.

EXFO Electro-Optical Engineering Inc. (Nasdaq: EXFO; Toronto: EXF)