Dragonwave Snaps Up Pseudowire Specialist

DragonWave Inc. (AIM/Toronto: DWI; Nasdaq: DRWI) has acquired pseudowire technology specialist Axerra Networks Inc. for US$9.5 million to strengthen its backhaul capabilities. (See Pseudowires.)

Dragonwave says the addition of Axerra's technology to its microwave backhaul platform will give it a product set that transports TDM and packet traffic across a single packet-based network. (See Axerra Gets Certified and Axerra Gets Pseudo-Wireless.)

The ability to handle legacy TDM as well as packet traffic across a single connection is critical for carriers that are looking to manage, in the most efficient way, the transport of all their customer traffic, including legacy voice as well as data services. (See RAD Gets Pseudowired at CommunicAsia, RAD Intros 3G Media Gateway, and Adtran Adds Backhaul Capability.)

Dragonwave already has that capability, but, points out Heavy Reading senior analyst and backhaul specialist Patrick Donegan, it was a proprietary solution.

"Dragonwave has been making do with its own proprietary approach to circuit emulation for some time. As a pure packet microwave vendor, it's clear it needed a standards-compliant pseudowire capability. This acquisition brings Dragonwave in line with the capabilities of many of the other leading microwave vendors," says Donegan.

Among the microwave backhaul vendors that boast pseudowire capabilities in their products are Aviat Networks Inc. (Nasdaq: AVNW) (formerly Harris Stratex), Ceragon Networks Ltd. (Nasdaq: CRNT), and ECI Telecom Ltd. . (See ECI Tunes In to Radio Backhaul , Harris Stratex Gets Adaptive , RAD, Ceragon Demo Backhaul, and Let Them Aviat.)

The acquisition not only gives Dragonwave new, standards-based technology, but new customers too. Axerra has about 50 customers, including a number of Tier 1 and Tier 2 carriers. The customer list includes a major US cable operator, according to the backhaul vendor's press release. While that cable operator hasn't been announced, it's likely to be Cox Communications Inc. (See Cox Preps Cellular Network, Eyes LTE, Taiwan Mobile Picks Axerra, Axerra Wins in Russia, and Dataphone Picks Axerra.)

It's not boosting Dragonwave's top line too much, though, as Axerra's annual revenues are currently about $9.5 million. Dragonwave reported full fiscal year revenues (to the end of February 2010) of $171 million. (See DragonWave Reports Q2 and DragonWave Reports 2010 Results.)

Axerra-related sales growth is clearly anticipated, though -- the acquisition deal includes potential additional payments of up to $15.5 million should certain (unspecified) revenue targets be hit within the next 16 months.

But for Axerra's investors this isn't a positive exit, as VC firms such as Carmel Ventures and Harbour Vest Partners LLC had pumped about $44 million into the pseudowire company during the past decade. (See Axerra Scores Extra Funding.)

— Ray Le Maistre, International Managing Editor, Light Reading

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