Meriton Buys Mahi Networks

Canadian vendor buys ROADM player to form a metro 'agile optical networking' vendor. It's a smart move, says analyst

October 3, 2005

3 Min Read
Meriton Buys Mahi Networks

MADRID -- Broadband World Forum Europe 2005 -- Canadian metro optical network vendor Meriton Networks Inc. has acquired Mahi Networks Inc. for an undisclosed sum, executives from the two firms announced here this morning. (See Meriton Acquires Mahi.)

The new company, to be known simply as Meriton Networks, will have current Meriton CEO Mike Pascoe at its helm, while Mahi president and COO Bill Gartner will be COO.

The deal brings together two of the metro optical sector's smaller players following months of speculations and consolidation talks. (See ADVA Eyes Movaz, Meriton.)

According to Pascoe, the combination of Meriton's DWDM and CWDM products, designed for mesh network topologies, with Mahi's reconfigurable optical add/drop multiplexer (ROADM) technology, which is optimized for ring networks, creates a widely applicable set of access and metro optical products that the new company will call its Agile Optical Networking portfolio.

The CEO believes this portfolio, managed ultimately by a single network management system, can help carriers address the pressing capacity challenges being created by the widely anticipated, and already increasing, traffic volumes created by the introduction of video, storage, and enterprise Ethernet services.

Heavy Reading Chief Analyst Scott Clavenna believes the combination makes sense and that the Agile Optical Networking approach is "a very big deal," but he notes that the new company faces many business and competitive challenges.

"Mahi brings some very strong ROADM and WDM transport capabilities, especially at 10 Gbit/s, to the equation, and Meriton brings a very low cost solution for WDM access and metro, with fully integrated STS/VC switching, which many operators are now asking for. So they can claim that the products are complementary, but there is still significant overlap."

Clavenna adds: "But Meriton will be taking on Mahi's burn rate, integration challenges, and startup status. It still hasn’t solved the OEM/partnership puzzle." And when you're up against rivals with the might of Cisco Systems Inc. (Nasdaq: CSCO), Fujitsu Ltd. (Tokyo: 6702; London: FUJ), and Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA), "that's a big issue."

Clavenna believes Mahi needed to become part of a larger player to survive, especially now that Tellabs appears to have won a big contract with {dirlink 5|205}, for which Mahi was competing. (See Tellabs Running ROADMs at Verizon .)

Meriton has landed a role in BT Group plc's (NYSE: BT; London: BTA) next-generation network plans, riding on Fujitsu's coattails. (See Fujitsu Shares Its 21CN Success.) That, though, appears to be Meriton's major account -- like Mahi, the majority of its wins have been with small service providers or utility firms. (See Mahi Restructures & Swims East and AltaLink Deploys Meriton HSM.)

So what's next for the new company? Pascoe says he will be hiring new sales staff to take the total number of employees up to about 150 from the current 135 (80 from Meriton, between 50 and 60 from Mahi). There will be some job overlap that "will need addressing," admits the CEO.

As for the technology, Meriton's first job is to get all the products working under a single network management system, and then the company can look at extending its capabilities beyond the current Layer 0 and Layer 1 and into Layer 2. Clavenna says this makes sense, but that there's no great rush. "Ethernet over optical transport is becoming a big deal, but is primarily a 2007 opportunity at most carriers, so they have time," says the analyst.

Pascoe will also be seeking partnerships with larger vendors that have complementary product lines, such as those with a strong access infrastructure offering. He also says the company is on course to reach profitability without having to raise any more money, but he wouldn't say when breakeven would come.

— Ray Le Maistre, International News Editor, Light Reading

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