DragonWave buys NSN's wireless backhaul unit

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DragonWave buys NSN's wireless backhaul unit

€15m deal propels Canadian specialist into the microwave top five, opening access to broader customer base

By CAROLINE GABRIEL

Published: 4 November, 2011

READ MORE: M&A | DragonWave | Backhaul

Wireless backhaul specialist DragonWave has significantly raised its game by agreeing to acquire Nokia Siemens' microwave transport business for just €15m. That catapults the Canadian firm, which has been fighting to reduce its dependence on flagship customer Clearwire, into the top five for microwave backhaul.

In the second quarter, according to Infonetics Research, NSN was ranked number five in the sector after Ericsson, NEC, Huawei and Alcatel-Lucent. However, the same analyst found that operators rate NSN joint second (with Ericsson and behind NEC) for the quality and advanced nature of its microwave technology, indicating that DragonWave is buying an innovative new platform for its expanded range.

But lagging behind its infrastructure arch-rivals had raised questions within NSN about the strategic importance of the wireless transport business, as the firm tries to streamline its activities and focus more on services and software-driven technologies.

For a small firm like DragonWave, though, the purchase allows it to gain new scale, to tap into NSN's well established customer base, and to gain a headstart in territories which have proved elusive, notably Europe. In Europe, and other markets where carriers have long embraced microwave backhaul, the incumbent vendors were entrenched and it was hard for a new player to break in.

This left DragonWave focused on north America, where microwave has only recently become a significant strategy, and particularly on new all-IP operators, often deploying WiMAX. That focus ensured a strong early start as the firm rode the WiMAX wave more promptly than larger players, but it also meant that the Canadian vendor suffered when the WiMAX bubble burst, particularly because of the slowdown of build-out by Clearwire. Its revenue in fiscal Q2 was $13.6m, compared with $27.2m a year earlier, and the company has reduced its workforce by 10% during this year.

Recently, it has been targeting new growth markets such as small cell backhaul and LTE, and also acquired Axerra to add a pseudowire option to its range.

But the NSN transaction is on a different scale, despite the low price tag, partly because the larger firm still remains closely involved. NSN is effectively offloading product development and operations, but will retain responsibility for selling and supporting its existing products. The companies expect about 360 NSN employees, mainly based in Italy and Shanghai, China, to transfer to DragonWave and for the deal to close in Q212. As the DragonWave statement put it, the deal will "substantially broaden and strengthen DragonWave's product presence in major mobile operators throughout the world through Nokia Siemens Networks' extensive global sales channel".

Marc Rouanne, head of network systems at NSN, said that the "strategic relationship" approach would mean "customers would continue to receive high quality services and sales support from Nokia Siemens Networks, while DragonWave's best of breed products would ensure they have access to industry leading technology."