I don't know much about DSC (apparently formally known as NKT Electronik), but here's John Butler of Prudential's take on it:
Excerpted:
Overall, we view NKT as an excellent strategic fit with Tellabs' existing European business, called Martis, or Tellabs OY. Martis manufactures a modular access system called MartisDXX which, unlike NKT, is largely an asynchronous access system (i.e., it is not SDH-compliant). Over the past two years, Tellabs has been working hard to develop SDH transport modules for DXX, and the acquisition of NKT should significantly further this effort. Also of note is the fact that NKT and Martis have very little customer overlap, thereby opening up the potential to realize cross-selling opportunities among the company's respective customers.
NKT's total purchase price is less than its latest 12-month revenue run rate. In our view, Tellabs is acquiring NKT at a very reasonable price. Back when DSC first acquired this business in late 1994, it paid $149 MM in cash. Tellabs is paying $110 MM in cash for this same division, which is quite reasonable in light of NKT's latest 12-month revenue run rate of around $115 MM. On a negative note however, NKT is near, but has not surpassed, break-even at this point. Given Tellabs' financial strength and experience in integrating Martis and other acquisitions, we expect this division to reach break-even within the next 2 to 3 quarters.
More importantly, I think the market's verdict is in, and is positive :) |
