Meriton eats Mahi

Meriton Networks is acquiring Mahi Networks for an undisclosed sum, the two equipment vendors revealed today. Neither company would disclose whether the deal was made with stock, cash or both.

Mahi has raised a total of $255 million in funding in its six-year life, but as a private company, it’s revenues are unknown. Five-year-old Meriton has raised a total of $100 million. However, most of Mahi’s investment was applied to develop a product that has since been discontinued, and Meriton is buying the company to obtain a product that Mahi acquired only last year.

Mahi came to market in 2003 with a metro core aggregation platform optimized for 45-Mb/s DS-3 connections. After years of prolonged trials but little traction among top-tier carriers, the company discontinued its flagship Mi7 product this spring and is still pondering what to do with it.

In the summer of 2004, Mahi branched out, paying $1.8 million in cash to acquire Photuris Networks, a defunct firm that nevertheless boasted the industry’s first commercial deployment of a metro reconfigurable optical add/drop multiplexer (ROADM).

Meriton believes that ROADM (Mahi’s Vx7) makes a good complement to its own metro optical add/drop switching platform as well as the wavelength-division multiplexing access gear Meriton added two years ago. Meriton’s 7200 metro core switch is ideal for multi-node mesh networks, while Mahi’s ROADM (heretofore known as Meriton’s 6400 OTP optical transport platform) is best suited for ring networks, said Bill Gartner, Meriton’s new chief operating officer (and Mahi’s old one).

The 6400 converts optical signals into electrical ones only at the ingress and egress points of a ring; elsewhere, it is able to avoid these expensive conversions because the signal’s destination is clear. The 7200, however, makes these optical-electrical-optical conversions in its switch fabric because multiple signals are terminating there and must be managed in the electrical domain.

The two companies occasionally found themselves in direct competition with each other for the business of large incumbent carriers, which often wanted both ring- and mesh-based solutions. Meriton and Mahi were each forced to offer three-year “road maps” for delivering both sides of that equation. “We realized we could get there much quicker by putting these products together,” Gartner said.

Meriton will integrate the two products with a common network management platform by next year, Gartner said.

After the acquisition closes, which both parties expect to happen in the next few weeks, the company’s headcount will nearly double to 150 employees. Meriton, based in Ottowa, will retain Mahi’s office in Piscataway, N.J. The company expects its addressable market next year--in the Americas; Europe, the Middle East and Africa and Asia--to be about $750 million, including a possible opportunity as a secondary supplier to Verizon Communications, which has been trying to select a metro ROADM equipment supplier this year.

Post-acquisition, Meriton intends to avoid one of the key barriers that plagued Mahi’s pursuit of major carriers: the lack of a major equipment vendor partner.

“Most incumbent optical vendors in the space have tired portfolios; we expect them to wither away,” said Ashish Vengsarkar, Mahi’s vice president of product marketing and business development. “There are a few incumbent vendors who are not in the optical space but have very strong relationships with carriers right now who are eyeing the optical space and want to get into this core infrastructure market but are unwilling to go to single-product companies and create multiple partnerships. Access vendors. Wireless solution vendors. We offer them now a unified solution.”

Meriton starts the search for that big-brother partner today, he said.