News

C-COR.net Deals for ADC's Cable Assets

7/15/2001 8:00 PM Eastern

C-COR.net Corp. fleshed out its broadband portfolio last week, striking a deal to buy a portion of ADC Telecommunications Inc.'s cable assets for $32 million in cash and $400,000 in assumed debt.

C-COR.net will absorb ADC's Optiworx family of modular headend and outdoor-node equipment and its line of DV 6000 and DV 6400a digital-video transport products. It will also take over ADC's facilities in Meriden, Conn., Buenos Aires and Klagenfurt, Austria.

The acquisition will expand C-COR.net's product base and strengthen its position in the HFC transport-equipment sector, said chairman and CEO David Woodle. Competitors in that space include Antec Corp., Harmonic Inc., Motorola Broadband Communications Sector and Scientific-Atlanta Inc.

The deal is expected to close by the end of August, C-COR.net said. At that time, John Caezza, the current president and general manager of ADC's BCD unit, will become vice president and general manager of C-COR.net's telecommunications-equipment group.

ADC's BCD group employs about 400 people. Of that group, 350 — mostly from ADC's Meriden plant — will stay on with C-COR.net, Woodle said last week during a conference call with analysts and reporters.

ADC said its affected staffers are included in a cost-cutting plan that will shave the company's head count by about 7,000 by Oct. 31. To date, the company has let go about 5,500 workers, an ADC spokesman said.

When the firings are completed, ADC will have reduced its staff by about 31 percent. ADC said it had 22,400 employees as of Nov. 1, 2000.

Woodle said the deal will help C-COR.net to expand its international presence in such areas as Latin America and Europe, and to add new domestic customers like Cablevision Systems Corp.

Prior to the market slowdown, ADC's BCD unit had peak annual revenues of between $150 million and $160 million, Woodle said. C-COR.net will eventually introduce products that combine the two companies' technologies, he noted.

C-COR.net said the acquisition will add about $15 million in revenue and two to three cents in earnings per quarter following a six-month transition period. The company also expects to incur between $6 million and $8 million in nonrecurring expenses to integrate BCD's product lines and facilities.

The purchase would be the latest in a string for C-COR.net, which is attempting to expand its trio of business lines: transport-distribution products, technology services and network-operations management services.

Last week, C-COR.net said it would further boost its broadband-services unit via the purchase of Simi Valley, Calif.-based Aerotec Communications Inc. for about $2.25 million in cash. Other recent C-COR.net acquisitions include Worldbridge Broadband Services Inc., Silicon Valley Communications, Advanced Communications Systems Inc., MobileForce and Convergence.com.

In a separate interview, Woodle wouldn't rule out more acquisitions. "If we see opportunities for investment that match our plan, we wouldn't be afraid to move forward with that," he said.

Although C-COR.net's primary focus is on handling the integrity and performance of outdoor cable plant, Woodle said the company plans for half of its revenue to come from the product business and the remainder from its services and management arms. The product business, which has suffered across the board in the wake of capital-spending cutbacks, is considered a "growth business" at this point for C-COR.net, he said.

While the economic picture is stabilizing, spending levels continue to vary from customer to customer, Woodle added. He said he doesn't expect to see a significant change on that front until next calendar year.

At ADC, meanwhile, the deal essentially shifts the vendor out of the HFC transport business, and enables it to focus on other gear expected to find a home on top of upgraded HFC plant, Kinetic Strategies Inc. president Michael Harris said.

For example, ADC will hold on to a range of key cable gear designed to move Internet-protocol data over cable and other broadband networks, including the Cuda 12000 IP Access Switch, which it acquired last year through its acquisition of Broadband Access Systems Inc., and its HomeWorx circuit-switched cable telephony line.

ADC also will retain its RFWorx gear for distribution of radio-frequency signals and its Singularite suite of customer-management, billing and service fulfillment applications.

ADC said the deal is part of a plan to trim non-strategic products from its portfolio. The company added that it will use the funds to remove some outstanding long-term debt, but was not more specific.

"We still have a wide array of products that fit the cable market," an ADC spokesman said. "We're not backing out of those or the cable market at all. We've identified our key assets and long-term growth plays, and that's where we'll focus our efforts."

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