Adva’s Movaz acquisition gets cheaper

The acquisition of Movaz Networks by Adva Optical Networking lost about 15% of its value between the time Adva announced the deal and its completion late last month, Adva revealed today.

When Adva announced the acquisition in early June, its stock price was more than $10 per share, making the purchase price of Movaz ($6 million in cash and 6,526,529 shares of Adva stock) about $77 million. But Adva’s stock price later sank--along with many others in the equipment space in recent months--to 6.55 euros (or $8.43) per share, making the final purchase price 50.3 million euros, or about $64.7 million.

Movaz had collected $182 million in funding in its six-year life, the most recent part of which was a $20 million round (and a line of credit) in January.

As part of the deal, Adva may still end up paying Movaz another 1 million shares of stock if Alcatel ends up not merging with Lucent Technologies, which has a partnership with Movaz. As a result of the Movaz acquisition, Adva shares some customer accounts with Lucent today but has assumed that the Lucent partnership will dissolve as Lucent merges with Alcatel.

On Adva’s second-quarter earnings call today, Chief Executive Officer Brian Protiva fielded questions regarding how the company would improve the gross margin of Movaz’s products to achieve Adva’s goal of maintaining gross margins in the 45% to 48% range next year. (Adva’s gross margin was 48.2% in the second quarter.) In addition to improving cost structures with anticipated synergies, Protiva said, Adva will use its greater size to leverage purchasing power Movaz didn’t have and charge new customers higher prices than Movaz did.

“[Movaz was] often winning business on price in the U.S.” Protiva said. “They had excellent technology, but if you’re a smaller company, you’re forced to compete on price. We don’t have to lead on price as much as Movaz to win new business.”

Whereas Movaz had slightly more than 120 employees, Adva and Movaz combined now have more than 650.

As part of the benefit of the Movaz acquisition was a greater foothold in the U.S. market, Protiva hinted that Adva may one day consider another acquisition to gain a better presence in Asia, the company’s smallest market today. “You might even see [mergers and acquisitions] activity from Adva in Asia,” he said. “But we’re not making a full court press for Asia today. We’re one and a half to two years away from making a big push in Asia.”

Related Articles

Globalcomm: Adva acquires Movaz

Ever-expanding Adva eyes WiMAX

Adva’s U.S. push cools in Q1