Tut's CoSine Deal Drags On

Tut Systems Inc. (Nasdaq: TUTS) has missed its March 31 target for completing its acquisition of CoSine Communications Inc. (Nasdaq: COSN) as San Jose, Calif.-based Tut completes paperwork and meets with shareholders.

Terry Gibson, CoSine’s CEO, tells NDCF that his company’s financials prompted the change in schedule. ”It had to do with the timing of the filing of our annual accounts -- we needed to file our 10-K,” he says.

So, when is the deal likely to be completed? “It will depend on the timing of the filing of our final S-4 and the related shareholder meetings,” he adds. “We certainly expect the shareholder meetings to happen in the second quarter.”

The deal has not been without controversy, although Gibson refused to comment on the court challenge to the merger which was filed earlier this year (see CoSine Deal Challenged in Court).

Yesterday, CoSine released the aforementioned results, posting annual revenue of $9.7 million and a net loss of $37.3 million, or $3.70 per share. The previous year’s revenue figure was $14.6 million and a net loss of $34.9 million, or $3.57 per share (see CoSine Reports Q4, 2004 Results)

Earlier this year, Tut Systems ended months of speculation about the future of CoSine by stumping up $24.1 million for the troubled equipment vendor (see Tut Takes On CoSine and CoSine Sold for $24M). Back in July 2004, CoSine announced it was examining "strategic alternatives" after a poor second quarter (see CoSine: The Big Sell-Off?).

In late October 2004, CoSine announced that it had signed an agreement for the early termination of the lease on its Redwood City, Calif., headquarters. The company also released its third-quarter results, posting a net loss of $14.6 million, or $1.47 per share (see CoSine Posts Q3).

Throughout all these upheavals, Quarry Technologies Inc., which at one time considered buying CoSine itself, has been batting its eyelashes at CoSine's customers. Quarry has already offered to migrate CoSine’S IPSX customers onto its own iQSecure platform (see Quarry Touts CoSine Migration Program).

Tut Systems now expects the CoSine deal to close in the second quarter, according to a spokesman for the Lake Oswego, Ore.-based firm.

— James Rogers, Site Editor, Next-Gen Data Center Forum