TXP merger promises better GPON economics

In terms of product portfolios, said Paul Forzisi, TXP’s vice president of marketing, “[TXP and CIG] are almost mirror opposites. Because we’re US-based, we were focused mainly on the outdoor market, moving toward the indoor market. We’re just on the cusp of releasing our second indoor ONT. [CIG has] a wide portfolio of indoor units and was starting to head toward outdoor. They were about to expend development resources to do what we have, and we were about to do the same. The two companies would have had a great deal of overlap and would have competed on price.”

Although TXP has announced Tellabs as a customer of its prototyping and retrofitting businesses, the company has been tight-lipped about any other aspects of the relationship. As Tellabs struggled with money-losing ONTs in its role as supplier to Verizon’s FTTP rollout, it began talking to unnamed third-party ONT suppliers for help sharing the costs, and a year ago, it introduced an indoor ONT. Still, Forzisi said Tellabs’ decision this year to give up its Verizon GPON contract has “zero effect” on TXP.

“The more people who get out generally is good for TXP because we want to be that provider of ONTs,” Forzisi said.

Adtran agreed to sell TXP's ONTs with the GPON gear it began shipping this spring. Verizon is also deploying indoor ONT/routers as it pushes into multidwelling units, and the carrier is already looking for new generations of the gear to be smaller and more integrated.

TXP got into the ONT market through a deal brokered with Siemens In late 2006. TXP hired Siemens’ development team and acquired some of the assets related to that business, including component inventories. TXP, in turn, agreed to pay Siemens royalties (basically 2.5% to 5% of generated revenue) . But that agreement expires in next year’s third quarter, leaving TXP all of its own ONT revenue.

Long-term, TXP CEO Michael Shores said, the goal of the merged company will be to issue a reverse stock split and join the NASDAQ exchange.