ADC acquires FONS

ADC today announced it will acquire Fiber Optic Network Solutions for $172 million in cash. FONS, which provides passive optical components and fiber cable packaging, will becoming part of ADC’s Global Connectivity Group after completion of the deal.

Related to that, Michael Noonan, president and CEO of FONS, will become vice president of business development for the unit.

The acquisition doesn’t really fill out ADC’s existing line of FTTX solutions, though it is expected to boost ADC’s outside plant sales in the FTTX market to the point that it will be more than 10% of overall company revenue. In fact, there is some overlap, according to Bob Switz, president and CEO of ADC.

“In some product areas there is a fair amount of similarity,” he said, during a conference call with analysts this morning. “In other areas, there’s significant differentiation. There’s also future generations of product on both companies’ drawing boards.”

Indeed, without being specific, it’s those future products that seem to hold some promise, said Pat O’Brien, president of ADC’s Global Connectivity Solutions business. “Both companies have a very broad pipe line of products that we’re looking at bringing to this FTTP/FTTN product space,” he said.

The merger also brings together two of Verizon’s three fiber suppliers. The RBOC, in fact, accounted for between 50% and 75% of FONS revenue last year. Switz said during the call that he wasn’t too concerned that Verizon would consider bringing in a third supplier to compete with Corning and the combined ADC/FONS.

“At some point, you have too many vendors as you move forward in a deployment,” he said. “Too many vendors with too many types of products tend to complicate things from an operations and deployment perspectives. Our view is they have a very strong supplier in Corning. They have a strong supplier in ADC and FONS independently, and combined will be an even stronger competitor. FONS will have the scalability now that they didn’t have before. I think that probably brings some comfort to Verizon. They’re part of a larger company that has the staying power and can absorb speed bumps.”