How buyouts happen
"Sycamore Networks to Acquire Sirocco Systems
Acquisition Broadens Sycamore's Reach into Emerging Metro Access Market
CHELMSFORD, Mass., June 6, 2000 ? Sycamore Networks, Inc. (NASDAQ: SCMR), a leader in intelligent optical networking, today announced a definitive agreement to acquire privately-held Sirocco Systems, Inc. based in Wallingford, Connecticut. Sirocco develops and markets optical access aggregation, switching and network management products targeted for the metropolitan access market.
Under the terms of the agreement, Sycamore common stock will be exchanged for all outstanding shares of Sirocco and Sycamore will assume the outstanding options of Sirocco. Based upon the closing price of Sycamore's common stock on June 5, 2000, the deal is valued at approximately $2.9 billion.
Sycamore, Chelmsford, Mass., is one of the hottest of the many small companies specializing in fiber-optic communications gear. It went public last November and now sports a $25.2 billion market capitalization.
Sycamore shares were down $7.0625, or 6.4%, at $102.9375 in 4 p.m. Nasdaq Stock Market trading Monday. The company said it will exchange 28 million of its shares for Sirocco.
Sirocco (www.siroccosystems.com), Wallingford, Conn., makes devices that connect existing telecommunications switches and lines to high-speed optical switches like the ones Sycamore makes. It announced its first products in April and expects to start customer trials in the fall. Sirocco's gear typically costs $25,000 to $200,000, significantly less than Sycamore's switches, which cost $500,000 and more.
Analysts expect Sycamore to report revenue for the year ending July 31 of $180 million, up from $11 million last year. The following year they expect revenue to top $400 million."
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A company with $180 in revenue, but with prospects of 200+% growth and a market cap of $25 billion spents $2.9 billion in stock to buy a private company founded in 1999 with about $44 million in start-up capital. The smaller company is bought for products not revenue.
Then take Novell, a company with $1 billion in revenue, market cap of $3.4 billion and probably a dozen or more advanced software technologies and there are no buyers?
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Either the software industry is dead and only hardware buy-outs make sense or I'm missing something here. |
