DZS snaps up NetComm for just $7m

• Broadband and IoT equipment vendor NetComm Wireless has been part of vendor Casa Systems since 2019
• But Casa recently went under and NetComm entered into a voluntary administration process
• Now NetComm has been saved by broadband infrastructure vendor DZS, which is paying just $7m for the business
• DZS has some challenges of its own, though

NetComm Wireless, the broadband and internet of things (IoT) equipment vendor that recently entered into a voluntary administration process as its parent company Casa Systems faltered, is being snapped up for just US $7m by optical and broadband access technology firm DZS, which views the acquisition as a way to expand its product portfolio. 

NetComm, founded more than 40 years ago in Australia, was acquired by Casa in 2019 for AUS $161m (US$106m) and run as a quasi-independent unit, but in the past year or so Casa’s business has been suffering, leading to the vendor carving up and selling its business. As a unit that had held on to a level of independence, Australian administrators were appointed earlier this year to restructure and sell NetComm, while Casa struck deals to offload its cable network technology and 5G mobile core and radio access network (RAN) assets via a court-supervised Chapter 11 (bankruptcy protection) process in the US.

Now DZS has stepped in to ensure NetComm has a future and has picked it up at a fraction of the price paid by Casa: That $7m might increase to $10m if certain financial targets are hit this year (see this official announcement for further details).    

DZS is buying a number of NetComm product lines (including related patents), including its Gfast broadband access (aka Fiber Extension), 4G/5G fixed wireless access (FWA), customer premises Wi-Fi (aka Home Broadband) and Industrial Internet of Things (IoT) networking products, as well as taking on an unspecified number of staff. According to DZS, NetComm has about 50 “active” network operator and enterprise customers in North America (including UScellular and Bell Canada), Latin America, Europe (Vodafone), Australia (Telstra and Aussie Broadband) and New Zealand. 

“The acquisition of NetComm underscores our commitment to innovation at the network edge and further aligns with our vision and strategy of becoming the premier technology leader in broadband networking and cloud software management solutions,” stated DZS president and CEO Charlie Vogt. 

“While we are technology evangelists for broadband everywhere and fibre-first architectures, fixed and mobile service providers will continue to evolve their networks and leverage a variety of technologies that best fit the geography, topology, and economics of the markets they serve. With the addition of NetComm’s fibre extension, fixed wireless, WiFi 7 home broadband and industrial IoT products, the expanded DZS portfolio arguably will represent one of the most complete and technologically advanced open and standards-based broadband networking and cloud management software portfolios in the world and be uniquely aligned with the breadth of CSP needs and architectures,” added Vogt. 

So this is good news for NetComm and its customers, but the move comes at a very interesting and somewhat challenging time for DZS. It is getting NetComm at a bargain price for sure, but in taking on the new business (the deal is set to close this quarter), DZS will be adding to its operating costs at a time when its financials are clearly under pressure and under scrutiny. 

Earlier this year, DZS sold its Asia business, issued new shares to Korean investors and raised $15m in cash from investment firm EdgeCo, all of which raised just $30m to help with the vendor’s more focused strategy. In addition, DZS hasn’t filed an earnings report with the Securities and Exchange Commission (SEC) since early last year and recently brokered a deal with the Nasdaq exchange whereby it can continue to trade as a public company but must comply with its outstanding filing commitments by 5 August. 

That new strategy though, as outlined at the beginning of 2024, does include a focus on the Americas, EMEA and Australia and New Zealand and the NetComm acquisition does bolster the customer base in those regions.

And DZS’s shareholders do, at least for now, seem positive about the move to add NetComm to the business, as the vendor’s share price jumped by 19% to $1.27 in trading on 6 May following the official M&A announcement. 

Now Vogt and his team need to close the deal, get its financial reporting in order and show that, in what is still a very tough environment for vendors, grow the DZS business and improve its valuation which, despite the share price improvement, is still languishing at just $40m.  

- Ray Le Maistre, Editorial Director, TelecomTV