DragonWave amends deal to buy Nokia Siemens' microwave unit

Backhaul vendor DragonWave amended its agreement to buy Nokia Siemens Networks' microwave transport unit, changing the acquisition price and other dynamics of the purchase.

DragonWave said it will now pay about $15.4 million (€11.7 million) in cash, up from the $13.7 million (€10 million) in cash that it agreed to pay when the deal was first announced in November 2011. As originally agreed, DragonWave will also issue common stock shares worth about €5 million. The vendor agreed to acquire other assets under a capital asset lease or other deferred sale arrangements with a value of approximately €3.6 million, less than the €5 million previously agreed. In addition, sales-based earn-out payments, which would have raised the value of the deal by €80 million, have been eliminated.

Under the amended agreement, Ottawa-based DragonWave will become the preferred strategic supplier of packet microwave and related products to NSN, and the two companies will coordinate technology development activities. DragonWave said it will enter into a services agreement with NSN "for outsourced R&D, product management, sales support and operations functions" that are "aimed at enhancing the ability of DragonWave to continue to deliver on critical customer deliveries." NSN will retain responsibility for its existing solution sales and associated services for microwave transport, while DragonWave will be responsible for developing and manufacturing the microwave transport products.

At the end of the service agreement, NSN's microwave transport assets in Italy could potentially transfer to DragonWave. DragonWave had been expected to take on those assets, including employees, under the original purchase agreement.

The closing date for the amended agreement is June 1, 2012. DragonWave expects to acquire NSN's operations in China in the second half of 2012, with 130 NSN employees in Shanghai transferring to DragonWave at that time.

Peter Allen, DragonWave president and CEO, called the amended purchase agreement "a transformational event," something the vendor could certainly use based on its fourth-quarter and full-year results, which revealed the company's performance has slipped significantly since the end of its last fiscal year.

For the quarter ended Feb. 29, the vendor's net loss widened to $13.4 million compared with $8.9 million one year earlier. Revenue slid 39 percent to $9.2 million. Quarterly revenue from customers within North America plummeted by more than half to $4.8 million, compared with $10.2 million in the fourth quarter of fiscal 2011. DragonWave said it had two customers that each contributed more than 10 percent of revenue in the fourth quarter.

The vendor continues to release new products and this week expanded its offerings to deliver broader frequency coverage and extended application support.

The company introduced the Horizon S-Series, a sub-6 GHz radio suited for non-line-of-sight applications such as those required for public safety and state and local governments, as well as certain microcellular backhaul applications. The S-Series provides asynchronous transmission and is aimed at deployments requiring speeds up to 200 Mbps. The S-Series provides added flexibility for operators.

DragonWave also took the wraps off its Horizon E-Series, which operates in the licensed 70/80 GHz frequencies. The company said its Horizon E-7000T provides up to 1 Gbps of asynchronous capacity per link and is designed for shorter-range deployments in urban environments, such as mobile backhaul, microcellular backhaul or enterprise connectivity.

The company's new Horizon S-Series and E-Series radios, along with its existing Avenue radio, position DragonWave to provide complete outdoor microcell backhaul solutions, said Earl Lum, president of EJL Wireless Research, noting the 5.8GHz, 60GHz, 70/80GHz bands are the primary ones used for microcell base station wireless backhaul.

For more:
- see this DragonWave release, this release and this release
- see this Ottawa Business Journal article
- see this Cellular-News article
- see this Reuters article

Related articles:
Johnson: Microwave backhaul will stay strong in 2012 even as operators hint at slower capex
Maravedis: 2011 highlights in mobile broadband
DragonWave acquires NSN's microwave transport unit in bid to diversify backhaul business
Nokia Siemens sells microwave unit to DragonWave
Jarich: Has 4G moved beyond 4G World?

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