Echelon's Pact With Italy's Enel For Network Tech
Dow Jones News Service ~ May 10, 2000 ~ 12:09 am EST
By Don Clark
Staff Reporter of The Wall Street Journal
Echelon Corp. said Italian utility Enel SpA has tentatively agreed to a far- reaching deal that could place Echelon's networking technology in every home and business in Italy.
Under a memorandum of understanding, Echelon said, Enel would pay $300 million over three years to deploy Echelon's technology, which allows remote meter- reading and a range of other communications functions over electrical lines. The Italian utility also would buy three million newly issued shares of Echelon's stock, or about 9% of its shares outstanding, for more than $100 million.
Assuming the parties reach a definitive agreement, the deal would more than double the annual revenue of Echelon, a long-struggling company that has never turned a profit in 12 years of operation. Even more important, however, is the possibility that Enel's move will accelerate the use of technology that ties all manner of appliances and business machines to each other and the Internet.
"I have always said that there is going to be an earthquake along the way that is going to change the whole landscape," said Kenneth Oshman, Echelon's chief executive officer. "I believe this is that earthquake."
Echelon plans to formally announce the tentative agreement today. In 4 p.m. trading yesterday on the Nasdaq Stock Market, Echelon fell $2.125, or 6.4%, to $ 31.
Echelon was founded in 1988 by A.C. Markkula, a co-founder and former chairman of Apple Computer Inc. He envisioned tiny, inexpensive control chips that spoke a kind of common language, allowing office machines, factory equipment and home appliances to interact with one another.
The company successfully developed the underlying communications technology, which it calls LonWorks. But Echelon ran into resistance from old-line companies that had their own technical standards, as well as competition from companies targeting specific industry segments, such as home automation.
Enel is Europe's largest publicly traded power utility, though the Italian government still holds a controlling stake. The companies expect the Echelon technology to reach more than 27 million Italian households.
(END) DOW JONES NEWS 05-10-00
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