Globalcomm: Adva acquires Movaz

CHICAGO--Adva Optical Networking has agreed to acquire Movaz Networks in a deal valued at roughly $77 million, the companies announced today.

Adva will pay $6 million in cash and 6,526,529 shares of its own common stock, which, at today's mid-day prices of $10.88, would be worth more than $71 million. Half of those shares would be paid immediately upon the deal’s closing, which is expected in July, and the other half would be paid six months later.

In addition, Adva will pay an extra 1 million shares (or about $10 million) if Alcatel backs out of its merger with Lucent Technologies, which has a strong partnership with Movaz.

“It’s a contingency based on the uncertainty [of the proposed Alcatel/Lucent merger],” said Brian McCann, Adva’s chief marketing and strategy officer. “That uncertainty creates value issues for us.”

Movaz, which sells reconfigurable optical add/drop multiplexers (ROADMs), collected a $20-million round of funding (and a $12 million line of credit) in January, raising the six-year-old vendor's total funding to $182 million. The private company claimed to have grown its revenue 66% last year to about $56 million.

Lucent has sold and helped developed Movaz’s ROADMs since at least early 2004. The two have won more than 30 customers together--more than a third of them in the last quarter alone.

“This is the height of our relationship with Lucent,” said Movaz’s Chief Executive Officer Bijan Khosravi, who will leave the company after it joins Adva.

The Movaz deal serves Adva’s current mission to become a more prominent player in the U.S. market, a mission that led the German-born firm to acquire Covaro Networks last fall. “We’re now, without question, the number-three player in metro [wavelength-division multiplexing] worldwide and in North America,” McCann said.

The Movaz deal shifts much more of Adva’s revenue and workforce to the U.S. Whereas Adva currently gets 18% of its revenue from North America (and nearly 80% from Europe), the combined company would get more than a third of its revenue from North America (62% from Europe). And after the deal, Adva’s roughly 80-person U.S. workforce will top 200, representing about a fourth of its total workforce.

“It’s a major shift for us,” McCann said. Movaz’s ROADMs share some overlap with Adva’s existing FSP 3000 optical transport platform. But at 2,000 kilometers, the range of Movaz’s gear is double that of Adva’s, the company said. And Movaz’s gear doesn’t support storage applications like the 3000 does. Adva will also try to sell its Ethernet access equipment to Movaz’s existing ROADM customers, McCann said.

Adva has not yet determined how the deal would affect its existing partnerships with Siemens and Fujitsu Network Communications, which sells Adva’s gear under its own brand in the U.S.