Via Yahoo,
June 14, 1999 VOL. II, NO. 24
CALIFORNIA NETWORKER EYES
SALE OF COMPONENTS DIVISION.
—Jesse Emspak
MRV Communications, a Chatsworth,
Calif.-based maker of networking equipment, is
considering selling off its optical components
division via an initial public offering, a move it
believes could bring in US$600 million–US$1
billion and prop up its stock price. Noam
Lotan, ceo, said the spinoff would narrow
MRV's focus to data networking and wireless
technologies. No banks have been chosen yet
to help structure the sale. Lotan said MRV has
had informal discussions with several banks
but is open to pitches from others. The
company is looking for a firm that can provide
aftermarket support. “We want a firm that will
be with us for a while,” he said. MRV's stock
was trading at US$10 7/8 last Wednesday,
down from its 52-week high of US$24. Lotan
noted that the stock of other companies have
risen following similar sales of non-core
assets.
Chester White, senior v.p. at L.H. Friend,
Weinress, Frankson and Presson, an Irvine,
Calif.-based investment bank, said MRV could
sell the division for 10 times revenue. He noted
that other companies in the optical networking
industry such as E-Tek Dynamics Inc. are
trading at even higher multiples. White noted
the optical components division contributed
about US$60 million in revenues to MRV 1998,
and US$30 million in 1997. “It's a good growth
story,” he said.
Vivek N. J. Rao, senior v.p. of research at
Gruntal & Co., said the company would be
wise to keep the division. Rao is not convinced
MRV could get more than three times revenue
at best. “Because the stock is in the dumps
they get a lot of grief from investors,” he said,
“but what makes MRV tick is they have it
(their optical components and switching
businesses) together. Just because investors
say it's a good idea doesn't mean you should
do it.” If anything, keeping the optical
components side of the company would serve
MRV better in the long run because it is
something that differentiates them from other
companies in an otherwise crowded market,
he said.
Lotan hopes to sell the division at about 10
times revenues. MRV's total revenues for 1998
was US$264 million. He noted that many
network hardware companies such as
Redback Networks and Copper Mountain
Networks have done well in public markets.
MRV has invested in seed capital in other
equipment start-ups, such as Charlotte's Web
Networks. If companies like Charlotte's Web
are successful in attracting other investors it
would bode well for the sale of MRV's optical
components division, he said.
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