CrossKeys to acquire US-based Dynamic Broadband Networks: Acquisition Will Extend CrossKeys Reach Into Multiple Internet Access Markets
KANATA, Ontario--(BUSINESS WIRE)--Dec. 21, 1999--CrossKeys Systems Corporation (Nasdaq: CKEY - news; TSE: CKY - news) today announced the signing of a definitive agreement that will see CrossKeys acquire the business of Dynamic Broadband Networks (Dyband), based in Allentown, Pennsylvania. Dyband develops broadband access management technology and software that manages cable, wireline (xDSL), satellite and wireless Internet access services. The deal is expected to close in early January 2000.
CrossKeys is a recognized industry leader in service level and performance management, particularly for the telecom network backbone. Through the acquisition, CrossKeys extends this expertise across access networks and all the way to the end-customer. CrossKeys products will now address the key ``last mile' issue facing service providers -- how to deliver reliable, high-speed Internet access service to home users, home offices and small businesses and maintain service profitability.
This acquisition opens up new market opportunities for CrossKeys and expands the portfolio offered to existing customers. Broadband service providers and network access providers will be able to deploy CrossKeys products to ensure fast, reliable Internet access for their subscribers.
Consideration for the acquisition includes a cash payment of US$10 million, together with warrants to purchase up to 2 million common shares with an exercise price in the range of US$6.75 to US$9.00. These common share purchase warrants are issued subject to the achievement of specified performance targets and for the purposes of senior employee retention.
``Through this acquisition, CrossKeys will deliver products in this fiscal year to address the rapidly growing broadband access market,' says Ian McLaren, President and CEO, CrossKeys. ``Service providers require broadband access management to deliver on their promise of high-speed Internet access. We are integrating our core network expertise with this 'last mile`` solution to manage traffic truly end-to-end. This represents a substantial opportunity and a more diverse market for CrossKeys.'
Steve Getz, President of Dynamic Broadband Networks said, ``CrossKeys customer relationships, channel partnerships and brand recognition are key to delivering the dynamic bandwidth management capabilities -- which are unique to our broadband access management solutions -- to service and network access providers worldwide.'
CrossKeys software will allow service providers to perform traffic shaping, guaranteeing the desired level of service to their broadband customers and reducing service provider costs. Broadband access management solutions eliminate the serious challenges service providers face: erratic network performance resulting in inconsistent service for subscribers; monopolization of bandwidth by aggressive users and the subsequent need to set performance caps for all subscribers; and costly over-provisioning in an attempt to meet peak bandwidth requirements.
The United States is the largest market for the new CrossKeys products resulting from this acquisition. The US is home to the main collection of new entrants, such as competitive local exchange carriers (CLECs) as well as Internet service providers (ISPs). The demand for high-speed data service (e.g., DSL or cable data service) is expected to grow from approximately two million subscribers this year to 13 million users in 2002 in the United States alone. In this way, the acquisition fits with CrossKeys sales strategy of aggressively targeting the US market, and its technology strategy of providing end-to-end traffic management for service providers.
About Dynamic Broadband Networks
Dynamic Broadband Networks develops broadband access management technology and software applications that provide advanced bandwidth management capabilities for cable, wireline (xDSL), satellite and wireless broadband access services, as well as corporate enterprise networks. Broadband access management solutions enable access and service providers to monitor bandwidth utilization; dynamically manage bandwidth consumption; provide controlled, competitive (open) access to broadband distribution networks; and manage broadband subscribers. Dyband was founded in 1995 and is based in Allentown, Pennsylvania. Dyband's experienced management and technology leadership is transferring to CrossKeys. About CrossKeys
CrossKeys Systems Corporation (www.crosskeys.com) develops and supports carrier-scale software that enables the world's largest and most demanding service providers to manage the equipment and traffic on their telecom networks. CrossKeys has demonstrated experience with multi-vendor and multi-technology networks. This expertise enables service providers to offer business applications, such as eCommerce and VPNs, with the minimum of infrastructure investment and the competitive guarantees that enterprise end-customers require. CrossKeys Systems Corporation is a public company whose common shares are listed for trading on NASDAQ (CKEY) in the United States and on The Toronto Stock Exchange (CKY) in Canada.
CrossKeys and logo are registered trademarks of CrossKeys Systems Corporation. All other trademarks are the property of their respective holders and are acknowledged by CrossKeys Systems Corporation.
This press release may include forward-looking statements which are made pursuant to the ``safe harbor' provisions of the United States Private Securities Litigation Reform Act of 1995. When used herein, words such as ``anticipate', ``intend', ``believe', ``estimate', and ``expect' and similar expressions, as they relate to CrossKeys or its management, are intended to identify forward-looking statements. Forward-looking statements are based on assumptions made by and information available to CrossKeys. Important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include risks associated with the integration of acquisitions and the ability to manage growth, continued market acceptance of CrossKeys products, increased levels of competition, rapid technological changes, risks relating to the protection of intellectual property rights and other factors described in CrossKeys filings with the United States Securities and Exchange Commission and other regulatory agencies.
Attachments: Conference Call details & Market Overview
PLEASE NOTE: Conference Call
We invite interested parties to a teleconference with senior management of CrossKeys Systems Corporation to discuss the Dyband acquisition.
The teleconference is scheduled for today, Tuesday, December 21, 1999 at 9:00 a.m. Please join us via audio telephone conference or through an audio Web cast. The news release and the presentation material will be available on the CrossKeys Web site at crosskeys.com
You will need a RealPlayer to listen to the RealAudio broadcast. Please visit the CrossKeys web site in advance to download free copies of the Real Player.
Live Event:
Telephone Conference Call - Please call 10 minutes prior to the
call
North America: 1-800-387-2195
Toronto and overseas: 1-416-641-6684
Audio Web cast - Listen only
CrossKeys Web site at
crosskeys.com
Replay:
Via telephone: 1-800-558-5253
Passcode # 13905774
Available until December 27, 1999
Audio Web cast: CrossKeys Web site at
crosskeys.com
Available until March 22, 2000
Attachment: Market Overview of Broadband Access Management
Broadband access technologies make Internet access services fast. Broadband access management makes them reliable for subscribers and profitable for providers.
Internet traffic growth has produced traffic congestion problems that will worsen as the number of users increase and applications such as eCommerce become a real market force. According to industry analysts, there are about 200 million Internet users worldwide. By 2003, there will be 500 million. These additional users will be demanding more of the Internet -- total commercial activity on the Internet is projected to grow from US$100 billion today to US$1.3 trillion worldwide in 2003 (source: IDC, Oct 1999). Consumers have become accustomed to near-instantaneous access to information through ATM machines and high bandwidth computer networks in the office. They expect to match that experience at home.
In response to surging customer demand, cable, wireline, satellite and wireless providers are deploying broadband access services to capture the consumer, small office/home office (SOHO) and small business markets. The most common services to date are digital subscriber line (DSL) and cable modem technologies. About two million households in the United States subscribe to high-speed data services today. This is projected to grow to 13 million within three years.
Broadband access management is one of the most important challenges facing access providers since it directly affects profit margins. It has an impact on cost of operations, customer satisfaction and market penetration. Service providers offering broadband access are caught in a dilemma. As they typically lease their Internet backbone connection, they must oversubscribe the connection to make their offering profitable, yet still provide fast, reliable service to customers. However, just a few aggressive users can degrade service for everyone because of the amount of bandwidth each subscriber can potentially demand from the network.
The future of broadband access services depends on the ability to manage the consumption of bandwidth dynamically -- from the backbone to individual users. Over-provisioning the network (buying more bandwidth) does not solve the long-term problem, but it does negatively affect a service provider's profitability. The broadband access management products that CrossKeys expects to deliver to the market will bring sense to otherwise chaotic traffic management within ``last mile' access networks. It will enable service providers to shape the traffic and gain control of the broadband access points. This means all users can receive optimum service in spite of peak bandwidth demands that can change second by second. In this way, CrossKeys products help deliver an Internet that is fast, consistent and reliable.
The US market for broadband access management is projected to grow from US$100 million in 1998 to over US$1.1 billion in 2002. Customers for this solution include service providers in CrossKeys current market space. They also include new categories of customers that the company did not focus on previously. Network access providers bring users and small businesses to the Internet and the network backbone. CLECs are included in this grouping, as well as CLECs whose competitive differentiator may be full services that include DSL or other access forms. This product solution broadens CrossKeys addressable market and expands its solution offerings to its existing market space.
Broadband Access Management-Closer look at the industry drivers
As broadband access services -- whether cable, wireline (DSL), wireless or satellite -- are increasingly deployed, the corresponding growth in network traffic will drive an increased demand for broadband access management.
A single broadband user can consume up to 150 times as much peak bandwidth as a narrowband subscriber (10 Mbps vs. 56 Kbps). The challenges of broadband access differ significantly from those associated with dial-up access.
Broadband service providers face a complex dilemma: a provider must oversubscribe the Internet connection in order to be profitable, and yet provide reliable consistent service performance in order to attract and keep subscribers.
For example a cable operator or cable ISP typically purchases a T3 connection (a dedicated ``pipe' that carries 45 Mbps). This costs about US$50,000 per month. The cable operator uses the T3 to connect the cable network to the Internet network backbone. In order to be profitable, the cable operator must oversell this connection by many times its actual capacity. This is possible because not all users transfer data at the same rate or at the same time. With a US$50,000 per month Internet connection, a cable operator must subscribe at least 1,250 customers per month, charging a rate of approximately US$40 per month, just to cover the cost of the T3.
At 1,250 subscribers, the capacity of the connection is substantially oversubscribed. However, to cover other operating expenses and achieve profitability, the operator must further oversell the connection. With new broadband access devices, such as cable modems, supporting up to 30 Mbps transfer rates, just a few broadband users can consume more bandwidth than the entire backbone Internet connection can deliver.
These key factors -- an increasing number of users, increasing bandwidth demands from each user and the need to maintain service profitability -- dictate that the future of broadband access services depends on the ability to manage the consumption of bandwidth dynamically, from the backbone to individual users. CrossKeys broadband access management will deliver traffic management for the important ``last mile' of telecommunications connections.
The implementation of broadband access management within ``last mile' distribution networks will be a key facilitator of the strong growth of cable, wireline, satellite and wireless broadband access services.
CrossKeys new broadband access management, plus CrossKeys existing expertise, mean that service providers can manage the traffic and performance of their networks from the network backbone out to individual users.
--------------------------------------------------------------------------------
Contact:
CrossKeys Systems Corporation
John Blackmore, 613/599-2300 ext. 8936
Email: jblackmore@crosskeys.com
Web Site: www.crosskeys.com
or
CrossKeys Systems Corporation
Shelley Moorhead, 613/599-2300 ext. 8336
Email: moorhead@crosskeys.com |
