Merger will cut costs, Verilink says

Larscom deal could bring annual sales of $75 million

Tuesday, May 04, 2004

By BRIAN LAWSON

Times Business Writer brianl@htimes.com

Huntsville-based Verilink Corp.'s planned merger with a Silicon Valley firm will result in more products, improved profit margin and new customers, Verilink officials said Monday during a conference call.

Verilink's move to acquire Newark, Calif.-based Larscom Inc. in an estimated $26 million stock swap was announced Friday. Both companies make high-speed telecommunications products.

The deal, which must be approved by Verilink shareholders, includes Verilink trading 6 million of its shares to Larscom, in a 1.166 to 1 swap. Shares of both companies are traded on the Nasdaq exchange.

Verilink stock closed Monday down 18 cents to $4.10 per share. Larscom stock closed at $4.55 per share, down 6 cents.

Verilink Chief Executive Officer Leigh Belden told stock analysts the two companies have different key customers, very little overlap between their products and he expects the company to cut expenses by sharing resources.

Larscom reported sales of $22 million in 2003. Verilink reported revenue of $13.6 million for the recently completed quarter.

Company officials said, based on Verilink's first quarter performance and including some revenue from the company's recent acquisition of XEL Communications, the combined company would have annual sales of about $75 million.

Verilink had sales of $28 million in fiscal 2003.

Belden said the company will be profitable after merger costs are absorbed over time.

A closing date for the deal has not been finalized, but the companies expect it to occur this summer.

Belden said the integration of Larscom into Verilink will be mapped out over the next few months, but he expects administrative and large portions of Larscom's operations to be consolidated into Verilink's operations in Madison.

Larscom reported 79 employees at quarter's end. Excluding the effects of the XEL acquisition, which closed during the last quarter, Verilink had around 85 employees.

Larscom CEO Daniel L. Scharre, who supports the deal, said he's been a long-time advocate of consolidation of smaller players in the telecommunications access market.

"In order to commit resources to robust research and development, we needed to be of a larger size and scale," Scharre said. "We have complementary products and an expanded customer base. I believe we can accomplish more together than on a stand-alone basis."



Merger will cut costs, Verilink says Larscom deal could bring annual sales of $75 million Tuesday, May 04, 2004 By BRIAN LAWSON Times Business Writer brianl@htimes.com Huntsville-based Verilink Corp.'s planned merger with a Silicon Valley firm will result in more products, improved profit margin and new customers, Verilink officials said Monday during a conference call. Verilink's move to acquire Newark, Calif.-based Larscom Inc. in an estimated $26 million stock swap was announced Friday. Both companies make high-speed telecommunications products. The deal, which must be approved by Verilink shareholders, includes Verilink trading 6 million of its shares to Larscom, in a 1.166 to 1 swap. Shares of both companies are traded on the Nasdaq exchange. Verilink stock closed Monday down 18 cents to $4.10 per share. Larscom stock closed at $4.55 per share, down 6 cents. Verilink Chief Executive Officer Leigh Belden told stock analysts the two companies have different key customers, very little overlap between their products and he expects the company to cut expenses by sharing resources. Larscom reported sales of $22 million in 2003. Verilink reported revenue of $13.6 million for the recently completed quarter. Company officials said, based on Verilink's first quarter performance and including some revenue from the company's recent acquisition of XEL Communications, the combined company would have annual sales of about $75 million. Verilink had sales of $28 million in fiscal 2003. Belden said the company will be profitable after merger costs are absorbed over time. A closing date for the deal has not been finalized, but the companies expect it to occur this summer. Belden said the integration of Larscom into Verilink will be mapped out over the next few months, but he expects administrative and large portions of Larscom's operations to be consolidated into Verilink's operations in Madison. Larscom reported 79 employees at quarter's end. Excluding the effects of the XEL acquisition, which closed during the last quarter, Verilink had around 85 employees. Larscom CEO Daniel L. Scharre, who supports the deal, said he's been a long-time advocate of consolidation of smaller players in the telecommunications access market. "In order to commit resources to robust research and development, we needed to be of a larger size and scale," Scharre said. "We have complementary products and an expanded customer base. I believe we can accomplish more together than on a stand-alone basis." Copyright 2004 al.com. All Rights Reserved.