Calix to acquire Ericsson's GPON assets, signs reseller agreement

Move immediately extends vendor's reach into global markets, broadens portfolio
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Calix (NYSE: CALX) on Wednesday signed a deal to acquire Ericsson's (Nasdaq: ERIC) fiber access assets, including the EDA 1500 GPON Optical Line Terminal (ONT) and complementary optical network terminal (ONT) portfolios.

A key advantage of this deal for Calix, which has been gaining momentum in a number of large U.S.-based telcos including CenturyLink (NYSE: CTL), Frontier Communications (Nasdaq: FTR) and some competitive international carriers like Malaysia-based Symphonet, is that immediately broadens its global and international reach.

The vendors said they signed a global reseller agreement where Calix will serve as Ericsson's "preferred global partner for broadband access applications." Through this arrangement, Calix's newly expanded Unified Access portfolio, including both GPON and VDSL2 copper-based solutions to 180 countries worldwide.  

As part of the agreement, Calix will also acquire 61 of Ericsson's U.S.-based employees and provide ongoing customer support for the Swedish company's equipment.

Although the two vendors expect the deal will be completed in Q4 2012, neither Ericsson nor Calix revealed the financial terms of the acquisition.

Calix said that it expects operations related to the assets it purchased from Ericsson will be accretive to non-GAAP earnings per share, while Ericsson said that the sale will have a negative impact on operating income of around SEK 400 million (USD 63.5 million) in Q4 2012. However, Ericsson added that it will be split equally between cost of sales and operating expenses, without any significant cash impact.

Similar to Nokia Siemens Networks' move to sell its access portfolio off to ADTRAN late last year, Ericsson's move is also designed as a way to dedicate more of its attention to 4G IP-based wireless.

Besides Calix, analysts believe that ADTRAN itself could have been the other possible suitor that could have emerged in this process.

"Ericsson has been pretty quiet regarding access and indicated back in April that they were de-emphasizing fixed broadband – so it is not entirely a surprise," Teresa Mastrangelo, Founder, Principal Analyst and Director of Research, Broadbandtrends, told FierceTelecom in an e-mail. "If ADTRAN (Nasdaq: ADTN) had not just bought Nokia Siemens Networks' (NSN) [access portfolio], I think they would have been a good candidate for this, but now Calix is on somewhat equal footing with the ADTRAN/NSN partnership."

China, in particular, is where Ericsson, through its acquisition of Entrisphere, had seen the majority of momentum for its GPON-based FTTH products. In July 2009, Ericsson announced it won Fiber to the Home (FTTH) deals from China's three major telcos: China Telecom (NYSE: CHA), China Mobile and China Unicom.

Mastranelgo said that while "Ericsson has had some good traction in China with GPON, it was well below that of Alcatel-Lucent (NYSE: ALU), Huawei and ZTE (Shenzhen: 000063.SZ)."

For more:
- see the release
- Seeking Alpha's article

Special Report: Wireline in the second quarter of 2012

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