EXFO Builds a Nest in the LTE Test Market

Canadian test vendor buys into the 3G and LTE testing sector with the acquisition of Finnish specialist NetHawk

March 12, 2010

3 Min Read
EXFO Builds a Nest in the LTE Test Market

Consolidation in the wireless test sector continued today with news that EXFO (Nasdaq: EXFO; Toronto: EXF) is buying wireless specialist NetHawk Oyj for €37.3 million (US$51.3 million). (See EXFO Buys NetHawk.)

The move follows JDSU (Nasdaq: JDSU; Toronto: JDU)'s recent acquisition of some Agilent Technologies Inc. (NYSE: A) mobile test capabilities, and a prediction by the CEO of Spirent Communications plc that 2010 will see a slew of wireless test asset sales. (See JDSU Snaps Up Agilent Wireless Unit and Spirent CEO Sees More Testing M&A.)

The NetHawk deal also adds to EXFO's run of purchases. (See EXFO Acquires PicoSolve, EXFO Builds With Brix, Test Vendor EXFO Buys Into IMS, and EXFO Buys, Ixia Plummets.)

EXFO, best known for its optical and Ethernet test tools, has already been touting some Long Term Evolution (LTE) service assurance capabilities, having updated its Brix System platform for the passive and active monitoring of LTE traffic. (See EXFO Monitors LTE, EXFO Implements EtherSAM, EXFO, Opnext Test 100G, EXFO Tests 10GE Over OTN, EXFO Touts OTN Testing, and EXFO Tests PBT/MPLS.)

The new acquisition, which will cost EXFO €27.6 million ($40 million) in cash once NetHawk's cash reserves are taken into account, gives it a lot more, though.

NetHawk has developed a range of 2G, 3G, and LTE protocol analyzers and simulators that it sells to equipment vendors and network operators, and a service assurance solution that EXFO believes is "highly complementary" to its existing Brix monitoring software. (See NetHawk Eyes Mobile IP Nets, Passing the LTE Test, NetHawk Updates iPro Tool, NetHawk Wins LTE Test Deal, NetHawk Monitors Air Interface, and NetHawk Unveils Tester.)

EXFO also believes the move propels it into the top five ranking of telecom test vendors and makes it the No. 2 player in the $600 million-plus wireless protocol analyzers and simulators market, behind Tektronix Inc. .

In the company's announcement today, EXFO CEO Germain Lamonde stated that the deal makes his company a "global force in wireless testing."

And with its extended capabilities in the next-generation mobile network assurance sector, it makes EXFO a stronger Service Provider Information Technology (SPIT) player. (See The SPIT Manifesto, Analysts: SPIT Is Hot Stuff, Putting SPIT in Focus, and The Rush Toward SPIT.)

It should push EXFO beyond the $200 million annual revenues mark as well.

NetHawk generated revenues of €28.5 million ($39.2 million) and EBITDA (earnings before interest, taxes, depreciation, and amortization) of €4.2 million ($5.8 million) in calendar 2009.

EXFO's fiscal year ends in August. In its most recent full year, the vendor generated revenues of $172.9 million. (See EXFO Reports Q4.)

In terms of headcount, NetHawk has 370 staff, mainly in Finland, India, and the US, all of whom EXFO plans to retain.

Once the deal closes, EXFO will have more than 1,600 staff in 25 countries and more than 2,000 customers.

EXFO's investors appeared to like the deal, as the Canadian firm's share price grew $0.18, or 2.75 percent, to $6.73 in morning trading.

— Ray Le Maistre, International Managing Editor, Light Reading

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