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Optical/IP

Meriton Lands in Xtera's Hands

Long-haul optical equipment vendor Xtera Communications Inc. (Nasdaq: XCOM) may be readying a push into new markets now that it's acquired Meriton Networks Inc. .

Xtera announced the deal in the first minutes of Monday morning. But Meriton's neighbors got to spend all weekend gossiping about it after someone leaked details to the Ottawa Citizen. (See Xtera Acquires Meriton and Xtera Buys Meriton.)

Terms of the deal were not disclosed, but Meriton almost certainly did not recoup the more than $200 million in venture money it's raised since 2000. The most recent chunk of that came in 2005; the most sizable, at $110 million, came back in 2001. (See Meriton Raises $54M, Finds Good Company and Xtera's Long-Haul Regeneration.)

It would be easy to say Meriton adds a metro angle to the long-haul and subsea DWDM gear Xtera is best known for. But last year, Meriton also took an interest in Provider Backbone Bridging -- Traffic Engineering (PBB-TE, a.k.a. PBT), the technology that's caught the eye of BT Group plc (NYSE: BT; London: BTA). Xtera might see a chance to crack into an attention-getting market that's outside its boundaries. (See Meriton Tackles Ethernet Transport and A Guide to PBT/PBB-TE.)

Xtera's purchase continues a gradual consolidation among the second-tier optical equipment providers. Meriton had bought Mahi Networks in 2005, and Mahi had bought what was left of Photuris prior to that. (See Meriton Buys Mahi Networks and Mahi Nabs $70M, Photuris Assets.)

Meriton is Xtera's second purchase recently, as the company glommed onto subsea specialist Azea Networks in November. (See Xtera Buys Azea.)

Combined, Xtera and Meriton employ about 110, with 40 of those stationed in Ottawa. Another 35, mostly in Kanata, Ontario, were laid off, the Citizen reported.

Xtera's release didn't discuss what will happen to the companies' executive ranks, but the Citizen reports that Mike Pascoe, Meriton's CEO since 2005, won't be joining Xtera. (See Headcount: Vendor Vivisection.)

— Craig Matsumoto, West Coast Editor, Light Reading


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mgardner750 12/5/2012 | 3:44:05 PM
re: Meriton Lands in Xtera's Hands Xtera also acquired Metro-Optix in 2003.
vlui 12/5/2012 | 3:44:05 PM
re: Meriton Lands in Xtera's Hands LR:
Would be curious to see a rough estimate of the total amount of VC$$ put into all these deals:

Xtera
Meriton
Azea
Mahi
Photuris
(plus any other significant M&A/asset sale?)

it must be worth as much as infinera is today?!
opticalguy 12/5/2012 | 3:44:04 PM
re: Meriton Lands in Xtera's Hands Between Mahi and Photuris I believe there was somewhere upward of $370M (Mahi ~$260M, Photuris ~$110M). More than a quarter of a Billion. Can you say that--BILLION!!!!!

I find it hard that either company managed to continue through the telecom meltdown and that VCs continued to fund them without much revenue.

BILLION!!!
rahat.hussain 12/5/2012 | 3:44:02 PM
re: Meriton Lands in Xtera's Hands Xtera and Meriton should be commended for this action. Not sure what the motivation, but clearly a case where the VCs put aside their differences and understood the marketplace. When Nokia and Siemens, Ericsson and Marconi, and Alcatel and Lucent are combining forces, what chance do these minnows have in competing for the big business?

Sad to see Mike Pascoe go, although there is never place for two CEOs after a merger!

odo
googol_byte 12/5/2012 | 3:43:54 PM
re: Meriton Lands in Xtera's Hands > Between Mahi and Photuris I believe there was
> somewhere upward of $370M (Mahi ~$260M, Photuris
> ~$110M). More than a quarter of a Billion. Can
> you say that--BILLION!!!!!

Impressive, yes, but very inefficient. Corvis was able to blow through $300M in VC funding PLUS $1.1B in IPO money in half the time it took these guys to dwindle it away.

Of course, this pales in comparison to how quickly the Chromatis and Xros billions evaporated...
nshani 12/5/2012 | 3:41:46 PM
re: Meriton Lands in Xtera's Hands Not sure what the motivation? $$$ (or lack thereof), caused by over-optimistic view of the market (and thus committing so many millions in inventory), the noble approach of bailing Mahi (another few millions?), top heavy structure, and the decision to buy the LastMile IP.

Agree with the sentiment about Mike Pascoe, but some of the numbers quoted in the articles are incorrect: Xtera left behind only 23 R&D people - part of the R&D group they 'considered' to be critical. The rest (HR, finance, operations, NMS, R&D, etc - total of ~65% were let go either immediately or within 2-4 weeks).

Within ~2 weeks, a key R&D person (the only FPGA designer) left, with more on the way. As I see it, this operation may fold in a few months.

The same happened when Xtera brass arrived in NJ (home of Mahi) the next day: out of 40+, only 13 were left - can you see a future there? I wonder what happened to the Shanghai office - after 2 years, many trips and countless $$$ spent there, not much was there to show for it.

Xtera put an immediate damper on any future development of PBT by Meriton (thus reducing the goodwill of BT to 0), and those that were left behind are reduced to support/maintenance position of the existing products.
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