Wednesday, August 9, 2006

Cisco Takes 80% Stake in Nuova Systems for Data Center Solutions

Cisco Systems has committed certain technology and $50 million of funding to Nuova Systems, a start-up based in Santa Clara, California, with the possibility of up to $42 million in additional funding in the future. The subsidiary will be approximately 80% owned by Cisco, with the remaining 20% interest held by employees of the subsidiary. Sales from the subsidiary will be consolidated with the accounts of Cisco starting in fiscal year 2007.

Cisco said it made the investment in Nuova to accelerate next-generation product development in the data center. Nuova Systems' product development efforts will complement Cisco's current data center product portfolio which includes the Catalyst 6500, Cisco's core enterprise networking platform, the MDS line of storage switches, SFS server networking switches and application networking solutions for accelerating applications within the data center and to the rest of the enterprise.

Cisco has the option to purchase the remaining 20%. The potential payouts made under the call option are primarily based on the success of Nuova Systems' products sold through Cisco, with a minimum potential payout of $10 million and a maximum total payout of $578 million.

Nuova Systems, which has not yet announced any products or plans, has 76 employees and is based in Santa Clara, California. Nuova Systems' founders include former Cisco executive Mario Mazzola.
  • In July 2005, Cisco Systems named Charles H. Giancarlo as chief development officer, replacing Mario Mazzola who retired from Cisco after serving over 12 years in engineering leadership roles.

Andrew and ADC Terminate Merger Agreement

Andrew Corporation and ADC Telecommunications Inc. have mutually agreed to terminate the merger agreement announced on May 31, 2006 without liability to either partner. To effect the mutual termination, Andrew has agreed to pay ADC $10 million. In addition, Andrew has agreed that ADC would be paid another $65 million in the event Andrew effects a business combination transaction within 12 months.

"While we still believe in the convergence strategy, the merger of Andrew and ADC was only one method to execute against that," said Ralph Faison, president and chief executive officer, Andrew Corporation.

"While we believed in the strategic rationale of this combination and are disappointed that the merits of the transaction were unrecognized in the marketplace, we will continue to execute on our strategy to become the leading supplier of network infrastructure solutions to our customers worldwide," stated Robert E. Switz, president and CEO of ADC.

Separately, board of directors of Andrew Corporation voted unanimously to reject an unsolicited proposal from CommScope, to acquire Andrew for $9.50 per share in cash. The board described CommScope's proposal as "wholly inadequate and not in the best interests of its shareholders."http://www.andrew.com
  • Under the stock swap deal announced in May, the combined company would have been based at ADC's world headquarters in Minnesota with ADC's John A. Blanchard continuing as non-executive chairman, and ADC's Robert E. Switz continuing as its president and CEO. The combined would have had and estimated $3.3 billion in annual global sales of wireline and wireless equipment.

    ADC supplies broad-based connectivity solutions for copper, coaxial, fiber, radio frequency, broadcast and enterprise networks. Andrew provides broad-based wireless solutions for antennas, cable products, base station subsystems, in-building and distributed coverage, geolocation systems and satellite communications.

Deutsche Telekom Plans Aggressive Price Cuts, Accelerated Move to IP Platform

In a press conference to review its half year performance, senior managers of Deutsche Telekom vowed to take a much more aggressive approach to competition in its domestic markets in the second half of 2006 with price cuts, bundled products and the launch of new services. The company is losing high-margin revenue in Germany while growing internationally where margins generally tend to be lower. DT plans to respond by defending its market share and revenues in Germany.

Earlier in the week, the company trimmed its financial outlook for the remainder of the year.

The newly released financial report shows DT's net revenue rose by 3.2 percent to 30.0 billion EURs in the first half of the year. Adjusted EBITDA fell by 2.4 percent to 9.8 billion EURs. Cash flow from operating activities remained almost stable at 5.7 billion EURs. At 2.1 billion EURs, net profit was also at the prior-year level.

In contrast, revenues generated outside of Germany increased 13.5% to EUR 13.6 billion.

DT said the mobile business in Germany is marked by aggressive competition, a massive drop in prices and cuts in termination charges. In the first half of 2006, T-Mobile Deutschland's revenue declined by 3.3 percent despite an increasing customer base.

T-Mobile plans to respond with a highly simplified and lower prices. New bundled offers will cost under 10 cents per minute regardless of network termination.

More than 700,000 customers are now signed up for the T-Mobile@home service, including the addition of 187,000 users in Q2.

Domestic revenue in DT's broadband/fixed network strategic business area declined by 6.5 percent year-on-year in the first six months of 2006. The decrease in access, call and interconnection revenue had a negative impact on development, as in previous quarters.

T-Com lost approximately 500,000 lines in the second quarter of 2006 as a result of customers' switching to other network operators and to the cable network, and as a result of mobile substitution. Over 1 million lines losses have been recorded this year -- more than expected.

In Q2, there were about 400,000 domestic DSL additions, bringing the total count to 8.96 million. At the same time, 387,000 of the DSL additions were sold by other retailers. That means the DSL resellers are now accounting for 96% of growth.

T-Com plans to respond with a new pricing and product structure in the fall that is geared towards bundled products and is aimed at customers considering changing to bundled offers of alternative network operators. There will be new pricing plans for single-play, double-play and triple-play bundles. Double-play (telephony + broadband will cost under EUR 40).

T-Systems revenue is down around 2.7% year-on-year. Revenue in Germany has declined by 5.2%, as voice and access prices have fallen faster than expected. On the positive side, business process outsourcing continues to grow.

Internationally, T-Mobile USA added 613,000 users in Q2, giving it a total customer base of 23.3 million. This is below the 972,000 new adds recorded in Q2 2005, although the contract periods have been increased from one-year to two-years.

DT is trimming its CAPEX budget from EUR 10 billion to EUR 9 billion for the current year, not including potential spectrum acquisition costs in the U.S.

DT also faces staff restructuring costs affecting 32,000 employees by 2008. By the end of June, 5,100 employees had decided to leave the company.

"The industry is in the middle of a transformation phase... We will take an even more systematic approach to defending our market share and revenues in Germany -- by slashing costs and implementing simpler, cleaner price structures. At the same time, we plan to develop new products to retain our existing customers and attract new ones where possible.

"We will substantially reduce our cost base, mainly by accelerating the expansion of our IP-based broadband network platform.... To this end, our investments in the IP-based production platform will be made earlier than we planned."

T-Com Selects Ericsson for Broadband Rollout

Deutsche Telekom's T-Com broadband/fixed-network business unit has selected Ericsson's EDA solution for the expansion of its German broadband network. The rollout has already started for fiber-to-the-curb areas in Germany. Financial terms were not disclosed.

Ericsson EDA is an IP-DSLAM solution.

Under the agreement, Ericsson will deliver all nodes required for the different areas of the access network. Ericsson EDA will integrated into the existing T-Com network architecture, allowing the operator to increase coverage nationwide and increase speed up to 6Mbps.

Sprint Nextel Suffers Outage in NYC

Sprint Nextel suffered an outage in the borough of Queens, New York that was attributed to water damage at a central office operated by Verizon Communications.

The outage affected customers on the Nextel network and not the Sprint PCS network.

The incident was first reported by Reuters.

hanarotelecom Cites Gain in Broadband, Launches hanaTV

Korea's hanarotelecom announced a 21.2% gain in revenues to KRW 428.7 billion and a 22.4% increase in EBITDA to KRW 132.8 billion for the second quarter of 2006.

The company reported a broadband net addition of about 30,000 subscribers in Q2, a turnaround from net decrease in the previous quarter. The number of voice subscribers has continued to grow by around 20,000 net subscribers per month on average.

The company also noted the expansion of its 100 Mbps optical LAN coverage to 3.2 million households, which accounts for 60% of its apartment DSL coverage.

hanaro also highlighted the launch of "hanaTV", a commercial VOD-based TV-Portal service that provides various contents including movies, dramas, and educational programs through a broadband Internet connection and an IP Set-Top Box. The company said it is adding nearly 2,000 new subscribers each day and that it has attracted a total of about 30,000 subscribers since launching the service at the end of July. HanaTV has secured more than 16,000 hours of VOD content through agreements with more than 50 domestic/foreign content providers, including the Walt Disney Television, CJ Entertainment, SBS, BBC Worldwide, YTN, EBS, Daum, and National Geographic.

Hanaro has a target of attracting 250,000 subscribers by the end of 2006. The company will offer a full-blown Triple Play Service in the second half of the year, bundling a TV-Portal with broadband and voice services.

Alltel Wireless Offers XM Satellite Radio

Alltel Wireless will begin offering XM Satellite Radio programming via mobile phone for $7.99 per month. The mobile phone application was developed by MobiTV.

Alltel Wireless customers will receive audio streams of 20 popular commercial-free XM music channels including: The 70s, 80s and 90s decades channels, Top 20 on 20 (Top 20 Hits), Ethel (New Alternative Rock), The City (Hip-Hop/R&B Hits), XMU (Indie Rock), Bluesville (Blues), Highway 16 (New Country Hits), and Viva (Latin Pop Hits).

Juniper Finds Problems in Past Stock Option Practices

Juniper Networks issued a statement saying that its Audit Committee has reached a preliminary conclusion that the actual measurement dates for financial accounting purposes of certain stock option grants issued in the past differ from the recorded grant dates of such awards.

Juniper now plans to restate historical financial statements to record additional non-cash charges for stock-based compensation expense related to past option grants. The company has not determined the amount of such charges, the resulting tax and accounting impact, or which specific periods require restatement.

Axiom Signs Czech-based Vegacom as Reseller

Axiom Systems, which supplies service fulfillment software for telecommunication service providers, has signed Czech Republic-based systems integrator Vegacom as a Value Added Reseller for the company. The two companies join forces in order to provide regional service providers in the Czech Republic and Eastern European markets with Axiom Systems' 3rd generation AXIOSS OSS platform and Vegacom's integration expertise and consulting skills.

Sea Launch Prepares to Launch Koreasat 5 Satellite

Sea Launch is entering final preparations to launch the Koreasat 5 communications satellite on August 21 into an orbital position of 113 degrees East Longitude.

Built by Alcatel Alenia Space in Cannes, France, the hybrid spacecraft carries 36 active transponders in multi-band frequencies. Koreasat 5 is owned jointly by the Agency for Defense Development of Korea and KT Corporation. The Agency for Defense Development has managed the military side of the Koreasat 5 program and the Joint Chief of Staff of Korean Armed Forces will operate SHF and Ka-band transponders on the spacecraft to provide satellite communications services.

KT will operate 24 Ku-band transponders. Half of these will be capable of switching to regional beams to provide advanced broadband multimedia and digital television transmission services, as well as conventional telecom services to operators in the Asia-Pacific region. The remaining 12 Ku-band transponders will replace Koreasat 2 capacity for domestic use in South Korea.