DragonWave to purchase NSN microwave transport unit

Microwave manufacturer DragonWave today announced a plan to purchase Nokia Siemens Networks’ microwave transport unit—a move DragonWave hopes will enhance its competitive position in the burgeoning wireless backhaul market.

The acquisition will enable DragonWave to gain “additional and complementary products, additional geographic reach and added scale,” said DragonWave CEO Peter Allen on a conference call this morning to announce the acquisition. In addition, DragonWave will become a preferred strategic supplier of packet microwave and related products for NSN.

DragonWave will pay 10 million euros in cash and 5 million euros in common stock for the NSN unit, and a sales performance-based earn-out potentially could raise the value of the transaction. The transaction is expected to close in the first quarter of 2012.

Complementary product lines
DragonWave is a major player in the microwave backhaul market in North America, and has made several key customer wins—including Clearwire (CP: Clearwire leans heavily on wireless to backhaul WiMax network) and Sprint (CP: Sprint selects DragonWave’s workhorse for WiMAX backhaul). But outside North America, NSN is a stronger microwave backhaul player.

One of the things that made the acquisition attractive is that “NSN is strong in places where we traditionally haven’t been strong,” said Alan Solheim, DragonWave vice president of corporate development, in an interview this morning.

Until now, DragonWave has been positioned to sell to network operators looking for a stand-alone microwave backhaul product, but has been shut out of selling to operators seeking to purchase an end-to-end wireless network solution—including radios, transport, and other network elements.

“A certain class of customer wants an end-to-end solution and was simply not addressable to us,” said Solheim.

The NSN deal should help open this market and, from NSN’s point of view, eliminates the need for NSN to develop its own backhaul offerings.

On today’s call, Allen noted that DragonWave’s Horizon Compact product and NSN’s FlexiPacket are based on a “shared vision.” As Solheim explained, Horizon Compact is DragonWave’s flagship backhaul product and FlexiPacket is NSN’s flagship backhaul product and both are designed for easy installation in outdoor environments.

Customer commitments would likely prevent DragonWave from merging the current generation of the two products, Solheim said. He added, though, that “In the next generation, we would look to merge them for a best of breed product.”

Another asset that DragonWave gains through the NSN microwave transport acquisition is NSN’s network management system. Allen noted that NSN’s network management system is “more mature” than DragonWave’s own offering.

While the Horizon Compact line accounts for the majority of DragonWave’s sales, the company also has some other product lines. The company recently announced the Avenue line, a self-contained small cell unit that integrates microwave and wireline backhaul with primary and backup power and switching (CP: 4G World: DragonWave doing microcells with a twist).