Why Sorrento is acquiring RBN

Newly reincarnated optical equipment vendor Sorrento Networks is bulking up its product portfolio and customer base by acquiring Australian-born optical vendor Redfern Broadband Networks (a.k.a. RBN) for an undisclosed sum.

The original Sorrento was acquired by Zhone Technologies in 2004, which sold those same assets early this year to a new management team that brought back the old Sorrento brand.

For Sorrento, which has thus far focused mainly on metro optical networks, RBN provides an optical access portfolio. Nine-year-old RBN was largely focused on coarse wavelength division multiplexing (CWDM) gear, a cheaper version of dense WDM with fewer channels (thus lower capacity) and a shorter range (generally in tens of kilometers).

RBN’s products included a one-rack-unit multiservice provisioning platform and a one-rack-unit reconfigurable optical add/drop multiplexer, or ROADM. In particular, Nevelle said, RBN’s gear is well-hardened for outside plant deployment, making it a good fit for the expansion of broadband networks into remote terminals.

RBN’s reseller relationship with Ericsson for Europe and Southeast Asia gives Sorrento increased reach in those geographies. But Sorrento especially hopes to capitalize on RBN’s base among North American independent operating companies (IOCs), which make up about 60% of RBN’s overall business.

“We’ve had a good presence within the cable and CLEC spaces but not a lot traction in the IOC space,” said Jim Nevelle, Sorrento’s CEO.

RBN’s gear was once sold to those IOCs through Advanced Fibre Communications. But after AFC was acquired by Tellabs in 2004, Tellabs’ attention was soon diverted from IOCs and toward Verizon Communications’ fiber rollout. Sales of RBN’s gear in North America eventually reverted back to RBN, which didn’t help the company’s revenue growth, Nevelle said. “Tellabs kind of threw a curve ball at them.”

RBN’s co-founder and chief technology officer, Ross Halgren, will aid Sorrento initially in a consulting role, due to his obligations to a separate corporate entity in Australia, but Neville said he hopes to bring Halgren into the fold at Sorrento eventually. Beyond that, Sorrento will retain “a handful” of RBN’s workforce, which Nevelle estimates at less than a dozen full-time employees, and Sorrento will retain RBN’s research and development operations in Australia.

Financial terms of the transaction weren’t disclosed.

Sorrento and RBN’s revenues are both unknown, but Nevelle estimates the addition of RBN will boost Sorrento’s top line by 10% to 20%. Two years ago, RBN claimed to have doubled its annual revenue, but Nevelle said RBN’s revenue has been essentially flat for the past two or three years.

RBN’s total funding to date is also unknown. In 2004, RBN claimed to have raised $45 million since inception, and it declined to quantify a round announced in 2006. But Nevelle estimates the company’s total funding at over $100 million.