Overture, Hatteras Networks merge to create a larger Ethernet aggregation, access vendor

Overture Networks and Hatteras Networks have decided that they would be better off combining their complementary Ethernet resources as a combined company. Financial details of the deal, which is expected to close in three weeks, were not disclosed.

Set to continue operating under the Overture name, Jeff Reedy, existing Overture Networks CEO, will continue in that role at the new company, while Kevin Sheehan will become President.

Overture and Hatteras mergeBoth companies come to the table with complementary Ethernet product assets. Overture Networks made a name for itself selling Carrier Ethernet over TDM (EoTDM) and optical networks, while Hatteras Networks created a sizeable niche delivering Ethernet over Copper (EoC) gear.

"There is very little overlap between our products," said Kevin Sheehan, CEO of Hatteras Networks, adding that the two companies' product lines are "complementary, not competing."

Michael Howard, co-founder and principal analyst for carrier and data center networks at Infonetics Research, said that "these are two significant players and when they are put together they are even more significant," adding that "as a combined company they are one of the top players in terms of Ethernet Access Devices (EAD), including the bonded copper EFM that Hatteras has and Overture's NxT1/E1 products that bond circuits as opposed to physically bonding the copper." 

Closing the fiber gap
Rosemary Cochran, principal and co-founder of Vertical Systems Group, said the expanded Ethernet portfolio will mesh well with the diverse methods service provider take to deliver Ethernet to business customers.

"It's become clear over the past five years that both EoTDM and EoC are needed and it's not an either/or proposition," she said.

Even though the preferred method to access Ethernet is fiber, the reality, explains Cochran is that only an estimated 82 percent of U.S.-based SMBs don't have access to fiber, meaning that their options had been traditionally limited to purchasing more T1 circuits or making a large leap to a TDM-based DS3 circuit.

What the combined vendor can also play up further in the market is the need for new Ethernet access and aggregation solutions that can close the so-called fiber gap over existing network facilities.  

"Most businesses aren't able to get direct fiber, meaning everything else like SONET, T1, Coax, or T3 has to get used," Cochran said. "Service providers will use whatever they have to use depending on the speed, the location and the application."

From an access perspective, the growing need from global multinational corporation (MNC) customers to get Ethernet access to VPN services will be a key driver. Over a traditional TDM-based network, it was challenging for service providers to scale to higher speeds for customers accessing their VPNs.

"When you look at MNCs in different customers, they are hitting bandwidth limits with VPNs that are fed by a T1 and now they want to go to higher speeds, so using Ethernet access to VPNs does not limit you to going to the next TDM connection, particularly on the global side," Cochran said. "These companies that are looking at the access side are looking at what they can provide to their customers and clearly the solutions from Overture and Hatteras are on that list."

Howard agrees that the newly combined company will be able to capitalize on the growth of both business and wireless backhaul opportunities where service providers can't prove out a business case to lay fiber.

"In spite of all the talk of the need to ‘fiberize' buildings and cell sites, the reality is it just does not happen that fast," he said. "In the backhaul arena, there's always going to be rural areas where it does not make sense to lay fiber yet the bonded copper technologies you'll soon be able get up to a 100 Mbps on the existing copper at cell sites."

Howard added that the "same thing is true of building connection and we have seen in the last year a pickup in operators that are more and more using Ethernet instead of E1s and T1s to connect businesses. Yeah, it's great to have fiber, but there's still going to be a lot of places that don't have fiber and won't have fiber for a long time because does not make economic sense" to bring fiber to some locations.

Complementary roles
While Overture Networks' EoTDM products resonated well with U.S.-based incumbent (Verizon) and UK-based competitive providers (COLT), Hatteras had found success not only in North America, but also in markets such as Europe and Asia Pacific.

Set on delivering a set of Ethernet aggregation and access products that can deliver services over copper, fiber and TDM in addition to being used in other applications such as wireless backhaul and DSLAM backhaul, the existing product lines of both companies will continue to be manufactured and sold to current and new customers.

In addition to the complementary product and geographic elements the two vendors bring to the table, both are located in North Carolina's Research Triangle Park.

"There's a big advantage of both Hatteras and Overture both being in North Carolina," Cochran said. "How many East/West deals have we seen where the product synergy may be there, but the culture synergy isn't there?"

For more:
- see the release

Related articles:
Hatteras expands Ethernet opportunity reach through Walker partnership
Dave Stehlin, President of Overture Networks on backhaul and Ethernet

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