EXFO Builds With Brix
Test vendor EXFO (Nasdaq: EXFO; Toronto: EXF) clearly has a taste for M&A: Having splashed out a week ago to buy VOIP test specialist Navtel Communications Inc. , the Canadian firm has opened its wallet again to pay up to $37.5 million for VOIP and IPTV monitoring firm Brix Networks Inc. (See EXFO Buys Brix and Test Vendor EXFO Buys Into IMS.)
EXFO is paying $28.5 million up front, while an additional sum of up to $9 million might be paid later if Brix hits booking levels of $16 million in the 12 months following the closing of the takeover. The deal is expected to close during this quarter, after which 85 staff will join the new owner and the Brix business will be renamed EXFO Service Assurance Inc.
And EXFO hasn't just been busy buying up companies: It's also just announced a near 23 percent rise in second quarter revenues to $43.3 million and net income of $4 million that was boosted by a $2.7 million one-time tax recovery.
Those numbers lit a fire under EXFO's share price Wednesday, sending it up $1.05, nearly 22 percent, to $5.90.
News of the Brix acquisition, though, was less well received by investors. EXFO's stock fell $0.30, more than 5 percent, to $5.60 today.
The reason? While EXFO is buying one of the best known brands in IP service monitoring, Brix's losses are going to weigh down on EXFO's earnings for a while. (See Report: IPTV Sparks OSS Uptake, Brix Monitors Ethernet Services, Telus Tests VOIP With Brix, Brix Expands VOIP Service, and Triple Play Fires Up Test Sector.)
In 2007, Brix posted revenues of $15.2 million, but a GAAP net loss of $6.8 million. EXFO says the deal will be negative to its earnings in the current financial year, neutral in fiscal 2009, and accretive in fiscal 2010.
By adding Brix to its Navtel acquisition, EXFO has firmly flung itself into the IP service assurance market, giving it a range of products that stretches from initial lab testing to active and passive network probes, a much more rounded portfolio.
Brix had raised $61.5 million in five rounds of financing since July 1999 from backers including Castile Ventures , Charles River Ventures , ComVentures , Fidelity Ventures , Star Ventures , and Telus Ventures .
— Ray Le Maistre, International News Editor, Light Reading