Zhone Technologies Announces $500 Million Equity Investment
OAKLAND, Calif.--(BUSINESS WIRE)--Nov. 2, 1999--
New Company Redefines the Business Model for the Development, Delivery, and Support of Leading-Edge Telecommunications Equipment
Zhone Technologies, a newly formed company founded by seasoned communications executives, announced today it has raised more than $500 million in startup capital -- the largest equity financing ever raised by a communications equipment startup -- to execute on its plan to become a new breed of equipment provider with a new vision of product delivery and support for telecommunications carriers worldwide.
Principal investors include Kohlberg Kravis Roberts & Co. (KKR), Texas Pacific Group, Inc. (TPG), and New Enterprise Associates (NEA). Credit Suisse First Boston (CSFB) acted as the placement agent in the funding round.
Zhone plans to rapidly create critical mass by using the funds to augment organic development with the acquisition of applicable technologies and expertise from both private and public companies. The company will combine existing solutions with Zhone intellectual property to create a product portfolio that is purpose-built to supply multi-million-user next-generation networks with a rich array of voice, video, Internet, and entertainment services cost effectively.
"Most startup companies today are caught up in a funding cycle that limits their product vision and slows time to market," said Mory Ejabat, chairman and chief executive officer of Zhone Technologies. "They use iterative funding rounds to first develop technologies, then create sales and support channels, and finally to expand their product set in sequential fashion. Zhone's strategy is to deliver a total solution very rapidly by taking advantage of existing technologies and expertise to fuel parallel development efforts and to acquire proven channels and seasoned support teams in the process. With this large investment in place, we have all the capital we need to fully execute on our plan."
Zhone Technologies was founded in June 1999 by an executive team that grew telecommunications pioneer Ascend Communications, Inc., from its startup roots to a multi-billion dollar company within a decade. Mory Ejabat joined Ascend in 1990 as vice president of operations and served as president, CEO, and director of Ascend beginning in June 1995. Jeanette Symons co-founded Ascend in 1989 and served as executive vice president of advanced products and chief technical officer. Symons is chief technical officer at Zhone. Bob Dahl, chief financial officer of Zhone, formerly was vice president of finance and CFO of Ascend. Ascend was acquired by Lucent Technologies (Nasdaq:LU) for $24 billion in June 1999. Both Symons and Ejabat continue to provide consulting and support to Lucent on transition issues.
"Zhone's plan to establish a rapid and strong market presence will allow the company to quickly capitalize on the multi-billion-dollar opportunities resulting from telecom reform worldwide. We believe they have the right team to deliver on that vision," said James Coulter of TPG.
"For a telecommunications equipment provider to be successful today, it must provide not only superior technology, but also a proven ability to support carrier needs for the long term," said James H. Greene, Jr., a general partner of KKR. "Zhone's strategy will allow them to grow their development, sales, and support teams in concert to provide a comprehensive competitive solution without compromising time to market. KKR has made a number of investments in telecommunications companies, and Zhone's distinctive approach and top-notch management team attracted us to this unique initiative."
"Ascend achieved its business success by combining internal growth with strategic acquisitions," said C. Richard Kramlich, co-founder and general partner of NEA. (NEA was also a primary investor in Ascend, and Kramlich served on Ascend's board.) "At Zhone, the same core team is applying those principles in a new and exciting way to allow carriers to take full advantage of the fruits of telecommunications deregulation.
"Zhone is redefining the competitive landscape for telecommunications equipment providers," said Frank Quattrone, managing director of CSFB's Technology Group. "We are excited to have the opportunity to partner with them."
Pursuant to their plan, Zhone also announced last week its first acquisition: Premisys Communications (Nasdaq:PRMS), a worldwide supplier of integrated access solutions for service providers. Zhone plans to support the existing Premisys product line and make use of its operating infrastructure. Zhone will also incorporate Premisys technology into its internal development efforts. Under the terms of the agreement, Zhone offered $10 per share for all outstanding shares of Premisys common stock. Premisys will become a subsidiary of Zhone, and Nicholas J. Williams, CEO and president of Premisys, will join Zhone as president of the subsidiary through the transition.
About Zhone Technologies, Inc.
Founded in June 1999 and based in Oakland, Calif., Zhone Technologies is a new breed of equipment provider with a new vision of product development, delivery, and support for telecommunications carriers worldwide. Starting with an unprecedented $500 million in funding, Zhone's strategy is to combine existing solutions with Zhone intellectual property to create a product portfolio that is purpose-built to supply multi-million-user next-generation networks with a rich array of voice, video, Internet, and entertainment services cost effectively. The company was founded by the senior management team that grew telecommunications pioneer Ascend Communications, Inc., from its startup roots to a multi-billion-dollar company that was acquired by Lucent Technologies (Nasdaq:LU) for $24 billion in September 1999. Zhone's initial investors include Kohlberg Kravis Roberts & Co., Texas Pacific Group, and New Enterprise Associates.
For more information about Zhone Technologies, consult the company website at www.zhone.com.
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