March 27, 2008 -- EXFO Electro-Optical Engineering Inc. (Quebec City, Canada) announced that it has acquired all the shares of Navtel Communications, a provider of Internet Protocol Multimedia Subsystem (IMS) and Voice-over-Internet Protocol (VoIP) test platforms for Network Equipment Manufacturers (NEMs) and Network Service Provider (NSP) labs.
Consideration paid consists of C$11.0 million in cash, subject to adjustments on working capital. The deal is expected to be neutral to EXFO's earnings for the remainder of fiscal 2008 and accretive in fiscal 2009, excluding amortization of intangible assets to be accounted for in the acquisition.
Navtel Communications, a privately held company in the Toronto area, specializes in testing next-generation IP networks that are increasingly combining wireline and wireless technologies. The company's InterWatch platforms are billed as fully scalable simulation and analysis test stations available in rack-mountable and portable formats.
The platforms can perform several critical tests (capacity, performance, stress and load testing) on various network devices to assure their ability to perform under real-life, IP-based, multimedia traffic conditions. Test modules can be hosted inside Navtel's platforms for characterizing next-generation switches, routers, session border controllers and media gateways.
"This acquisition fits strategically with our long-term plan to deliver strong growth in our protocol test business, which posted a compound annual growth rate of 64% in the last two years, and continues to deliver solid growth at the mid-point of fiscal 2008," comments Germain Lamonde, EXFO's chairman, president and CEO. "Navtel's cutting-edge technology strengthens our offering for NEMs and NSP labs which, in turn, have a significant influence on product selections made by NSPs."
IMS, widely touted as the new technology that will merge the Internet with the telecom world, allows wireline and wireless carriers to use a common IP application system to deliver new multimedia services that can be combined with legacy services across a number of different access technologies. IMS has been developed to become the overlaying architecture that will enable the efficient management and deployment of quadruple (voice, video, data and mobile) IP services.
Frost & Sullivan estimates that the IMS test and monitoring market will grow from an estimated $274.1 million in 2007 to $1.2 billion in 2013 for a compound annual growth rate of 27.9%. As a supplier, Navtel currently addresses approximately $130 million of this market, notes EXFO. Navtel also offers a range of VoIP and Generalized Multi-Protocol Label Switching (GMPLS) test platforms, as well as a variety of legacy test protocols.
"This acquisition also enables us to expand into the high-growth IMS and VoIP test markets, whose technologies are currently in their early stages," continues Lamonde. "We intend to leverage these technologies throughout their entire lifecycle, especially as they mature into portable test solutions for the NSP market in which EXFO is the world's second-largest supplier. We also plan to take advantage of Navtel's strong relationships with Tier-1 NEMs and leverage our own worldwide sales presence with NSPs to accelerate sales growth, while positively impacting earnings since Navtel's software-intensive test solutions generate high gross margins."
Navtel Communications posted sales of C$5.7 million in calendar 2007. Navtel's founder and CEO Joe Sutherland and his senior management team will ensure a seamless integration into EXFO. No restructuring is planned, with all 35 Navtel employees expected to remain with the company.
"We are pleased to become an integral part of the EXFO family," comments Sutherland. "Our technological leadership in IMS and VoIP testing is a good fit with EXFO's protocol test strategy. Combined with EXFO's global sales channels, market positioning and brand equity, we envision a bright future with strong synergies lifting our product offering and market presence to the next level."
