An Efficient acquisition: FlowPoint buy boosts DSL CPE

Efficient Networks turned up the heat on the DSL equipment market with its acquisition of FlowPoint, a manufacturer of broadband DSL routers. With a wider customer base and product offering, the two companies will have a stronghold in the DSL customer premises equipment market, just as DSL is emerging as one of the fastest-growing areas in the industry.

Efficient hopes to leverage demands for voice, data, video and fax services by expanding its offering to include multiple DSL product categories such as internal PC modems, LAN modems, telecommuter routers, small business/ branch office routers and voice-over-DSL products.

The acquisition suits both companies, said Mark Floyd, chairman, president and CEO of Efficient. "This broadens our product offering, from internal DSL modems up to full business-class routers. No other company has that scale of product offerings."

With Efficient targeting the small business, branch office and telecommuter market, and FlowPoint targeting small and medium-sized businesses, the acquisition makes sense, said Laurie Falconer, DSL analyst for TeleChoice. "It rounds out Efficient's offering without them having to spend a lot of money on product development."

A key factor in the acquisition was FlowPoint's integrated access device (IAD), a voice-over-DSL product for small businesses, Falconer said. "Voice over DSL is the next big thing."

During trials, FlowPoint's voice-over-DSL product interoperated with CopperCom's and Jetstream Communications' voice gateways. Both the IAD and its interoperability characteristics were integral in the acquisition, as they accelerate Efficient's move into the voice-over-DSL market. "There was an automatic synergy between FlowPoint's voice-over-DSL products and products that we've had in development for a while," said Greg Langdon, vice president of marketing for Efficient.

Both companies also can access a wider customer base. FlowPoint has a large competitive local exchange carrier (LEC) and ISP customer base, while Efficient's customers are integrated LECs. "The acquisition will be complementary to the marketplace," Floyd said.

Efficient expects to complete the $861 million acquisition by early January 2000. At first, the two companies will keep their equipment platforms separate, but eventually, a single product line will emerge.

The acquisition also is an important step for Efficient because its new strategy, product offering and customer base make it a big player, Falconer said. While Efficient was always a threat with its low-cost modems and market share strategy, the company had to start making some money, she said.