Westell takes on Teltrend: Will it be a breath of fresh air?

After a reorganization and adjustment in its business focus, Westell Technologies last week made another strategic move in an attempt to keep its head above water. The company will acquire competitor Teltrend for about $205 million in stock.

Each Teltrend share will be worth 3.3 shares of Westell stock, and the acquisition price is based on Westell's Dec. 10 stock closing price. The deal is expected to close by late March.

"Customers are going along a path of consolidation, and we are too," said Marc Zionts, the newly appointed CEO of Westell. "Larger customers are typically wanting to do business with larger vendors - and this gives us that."

Teltrend equipment, which is designed for the local loop, will fit in nicely with the Westell DSL access and customer premises equipment, Zionts said.

Westell hopes Teltrend's product line and customer base will help catapult it into profitability. "This will enable us to fuel our broadband DSL strategy," Zionts said.

Westell had an early lead with DSL and landed customers such as Bell Atlantic, said Claude Romans, director for loop access at RHK. "But that changed as players like Alcatel came into the market and aced them out." Now, Westell will face competitors such as Efficient Networks rather than larger equipment vendors.

But that shift may prove challenging. "Westell may be looking for a home and have grand goals, but it will be difficult for them to take on companies such as Efficient," Romans said. "No one is going to get rich with this [Westell/Teltrend] deal."

The combination will result in the loss of about one out of every nine jobs, Zionts said.

Although Teltrend CEO Howard Kirby said he would gladly accept a seat on the board of directors, Zionts and Westell President and Chief Operating Officer J. Nelson will run the combined company.