& cplSiteName &

ADVA Adds NFV Smarts With $35M Overture Acquisition

Ray Le Maistre
1/13/2016
50%
50%

Germany's ADVA has acquired Overture Networks for an initial $35 million in a bid to strengthen its cloud access business and create what it claims will be an "NFV powerhouse."

The purchase of the North Carolina-based NFV and Ethernet access system specialist, which could involve an additional $5 million conditional "earn-out" payment, will allow ADVA Optical Networking (Frankfurt: ADV) to offer customers a complete NFV architecture including programmable hardware, "comprehensive" software and end-to-end orchestration services, claims the optical and Ethernet infrastructure vendor.

Combining two of the industry's biggest makers of carrier Ethernet equipment, the transaction will also boost ADVA's footprint in North America, the region that accounts for the majority of Overture's business. ADVA is stronger in the EMEA region, which accounts for about 60% of its revenues, while the Americas generate about 32% of sales and Asia-Pacific just 8%.

"We're creating a number one player in Ethernet access devices… [with a] complete solution set for business Ethernet, mobile backhaul and carrier wholesale applications," said Brian Protiva, ADVA's CEO, in a statement about the various benefits of the deal. Combined, the two companies have a 21% market share, based on H1 2015 numbers from IHS Infonetics.

What will this do for ADVA's financials? Overture Networks Inc. is a private company that doesn't publish its revenues and ADVA isn't giving anything away currently: Protiva tells Light Reading that further details about the impact of the deal should be forthcoming when the German vendor publishes its fourth-quarter and full-year results on February 25.

The acquisition will, though, only add to the sales momentum that ADVA has been building up during 2015. For the first nine months of last year ADVA reported revenues of €330.2 million (US$357 million), up by 31% year-on-year, while operating income grew to €19.2 million ($20.8 million) from €3.2 million ($3.5 million).

It will also add to ADVA's headcount: The company currently boasts about 1,500 staff and will add 178 employees -- "mostly engineers and really excellent people," says Protiva -- as a result of the acquisition.

As for customers, Protiva says there is a little overlap but that while Overture has hundreds of customers most of them are very small. There are between five and ten key customers that are exciting him, particularly Windstream Communications Inc. (Nasdaq: WIN), an operator that Protiva has been coveting for "about a decade." (See Windstream Upgrades With Overture and Masergy's Bold NFV Play Is Customer Driven.)

Investors received the news cautiously, as ADVA's share price added just 0.6% Wednesday morning to hit €10.65.

Less impressive is the return for Overture's investors: The Morrisville, N.C.-based company has raised more than $103 million from companies including Morgenthaler Ventures, Questmark Partners and Globespan Capital Partners since its inception in 2000, the most significant cash injection being a near $44 million round from a consortium of unidentified investors in March 2011. (See Overture Secures $8 Million, Overture Grabs More Funding and Overture Gets $12.3M.)

Overture isn't ADVA's only acquisition in recent times, though it is the most significant: In November 2015 ADVA bought optical monitoring assets from technology incubator Mic AG; and Time4 Systems was added to its network synchronization portfolio in August 2015, building on the 2014 purchase of Oscilloquartz SA. (See ADVA Acquires Optical Monitoring Team, ADVA Clocks an Acquisition, Eyes 2 More and ADVA Buys Oscilloquartz SA .)

Virtualization and cloud focus
The key driver for the acquisition is virtualization.

Like all of its carrier Ethernet peers, large and small, ADVA wants to be a prime New IP partner and supplier to network operators that are building next-generation distributed cloud architectures. A combination of ADVA's hardware, including its access devices, metro aggregation and data center interconnect (DCI) platforms, and Overture's Ensemble software and hardware gives it a much more rounded portfolio. (See DCI Boxes Aren't Just for Metros Anymore.)

How Overture Adds to ADVA's Portfolio
Source: ADVA
Source: ADVA

ADVA has already been positioning its FSP 150 access device, which network operators deploy at the edge of the network, as a host for multiple virtual network functions (VNFs) and has engaged in demonstrations with long-time customer BT Group plc (NYSE: BT; London: BTA) to show this capability. Now the acquisition of Overture gives it a ready-made portfolio of cloud management and orchestration tools that can be deployed in centralized data centers and/or at the network edge on white box hardware or boxes such as the FSP 150. (See BT, ADVA Show Off NFV-Enabled Managed Services and ADVA Adds NFV to Demarcation Devices.)

Overture's Ensemble virtualization portfolio includes: its Orchestrator, for automated service creation and activation; its Analytics tool; an open source SDN controller; the Connector, a Carrier Ethernet VNF previously known as Ensemble Carrier Ethernet (ECE); Registrar, a recently launched software license management and pricing tool; its Dashboard to provide a view of the various tools; and the 65 Virtual Service Edge (vSE), which it describes as "an open server wrapped in a carrier-class chassis." (See Overture Adds Function, Pricing Flexibility, Overture Networks NFV Solutions and Multi-Vendor NFV Trial Scores 1-Gigabit Throughput.)

Overture Ensemble
Source: Overture
Source: Overture

Overture has also curated an extensive NFV-related ecosystem that includes names such as Brocade, Dell, Intel, Metaswitch and Sonus. (See Overture's NFV Ecosystem Attracts New Members.)

— Ray Le Maistre, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, Editor-in-Chief, Light Reading

(3)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Steve Saunders
50%
50%
Steve Saunders,
User Rank: Blogger
1/13/2016 | 9:33:21 PM
Re: Overall a positive move
i agree... but i think Overture and investors read the market correctly. 

Overture has great people, technology, and lots of (small) customers... but it wasn't going to make it versus the Ciscosson/Huawei borgs (plus JNPR, Ciena et al). 

Sign of the times, eh? 

GREAT deal for ADVA. 

 

 

 

 

 

 

 

 

 
cnwedit
100%
0%
cnwedit,
User Rank: Light Beer
1/13/2016 | 10:22:01 AM
Re: Overall a positive move
Definitely positive for ADVA - I'm sure the Overture investors aren't that thrilled at the return. It seems like quite a bargain to me. 
Ray@LR
100%
0%
[email protected],
User Rank: Blogger
1/13/2016 | 7:45:28 AM
Overall a positive move
Yes there will be some overlap in legacy Carrier Ethernet but the key thing here is people and trust -- ADVA and Overture are both companies that, in my opinion, are trusted vendors and I'd be shocked if any existing customers didn't see this as possitive and if this didn't attract more traction from service providers and large enterprises.
Featured Video
Flash Poll
Upcoming Live Events
March 12-14, 2019, Denver, Colorado
April 2, 2019, New York, New York
April 8, 2019, Las Vegas, Nevada
May 6, 2019, Denver, Colorado
May 6-8, 2019, Denver, Colorado
May 21, 2019, Nice, France
September 17-19, 2019, Dallas, Texas
October 1, 2019, New Orleans, Louisiana
December 5-3, 2019, Viena, Austria
All Upcoming Live Events