DragonWave Purchases NSN Microwave PTP Radio Product Line

More consolidation in the PTP market today as DragonWave announced it was purchasing the microwave radio product line of Nokia Siemens Networks for an initial amount of EUR 10 million in cash and EUR 5 million stock. There is another EUR 10 million in employee liabilities including transfer of 360 employees in Milan, Italy and Shanghai, China and a EUR 5 million in capital asset lease arrangement. So the initial value of the transaction is EUR 30 million. There is an additional earn out of EUR 80 million over the next 18 months to four years that could put the total transaction value at EUR 110 million.

We believe that this is a major shakeup in the PTP industry and clearly puts DragonWave into a leading position going forward. The company had been a key supplier to enterprise/WIMAX operators but not to mobile operators. NSN has been struggling and the recent decision to re-capitalize the company via parents Nokia and Siemens has allowed the company to complete its recent acquisition of Motorola Networks. The PTP radio group within NSN has struggled over the past several years. We think that NSN believes it is a strategic but non-core group within its overall wireless infrastructure product line.

NSN will continue to sell PTP radio products through its sales channels but DragonWave will perform R&D, manufacturing and be the strategic supplier of microwave PTP products to NSN. So it’s not like NSN will quit selling radios, They are just reducing their ongoing liabilities by out sourcing.

The closing date for the transaction is Q1 2012.