I stumbled onto a piece of trivia that might have ramifications down the road: In the change over from NextLevel's becoming General Instrument Corp, 10% of the new company was put in the name of Spencer Trask, Inc. The same co. that funded Ciena Corp. Today NextLevel was named as the supplier of infrastructure for US West's VDSL trials.
And so the plot thickens. . . :)
Pat
nlvl.com
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CHICAGO, January 14, 1998 - NextLevel Systems, Inc. (NYSE: NLV), which is in the process of changing its name to General Instrument Corporation, today announced that it has placed its advanced telephony business, Next Level Communications (NLC), in a new limited partnership to maximize its growth potential. An entity controlled by Spencer Trask & Co., a New York technology investment firm, is the operating general partner of the partnership and General Instrument is the limited partner.
Under the terms of a definitive agreement, Spencer Trask has acquired approximately a 10% interest in the NLC partnership, with the potential to acquire up to an additional 10% in the future to the extent NLC's value exceeds $700 million.
General Instrument contributed all of the assets and business of NLC and has approximately an 80% limited partnership interest. GI has also made a $75 million loan to the partnership to help fund NLC's continuing research and product development. The new structure will also provide significant equity to NLC employees.
In 1993, Spencer Trask was the initial venture capital investor in Ciena Corp., an advanced telephony products start-up. Ciena went public in 1997 and has a current market value of approximately $6 billion, making it one of the most successful technology IPOs of recent years. Like NLC, Ciena is building on advanced technology developed in part at General Instrument.
NLC, based in Rohnert Park, CA, has more than 300 employees and reported its first revenues in the third quarter of 1997. NLC is currently deploying its NLevel3 Switched Digital Access (SDA) system, a next-generation broadband access system and digital loop carrier, under long-term contracts with Bell Atlantic and US West. The NLevel3 SDA system is the first stand-alone unified access platform to allow telephone companies to cost-effectively provide voice, digital video and Internet/data services to telephones, television sets and personal computers throughout the home or office.
The US WEST contract includes a commitment to purchase 450,000 xDSL (digital subscriber) lines and 450,000 of NLC's N3 Residential Gateways. NLC is currently deploying its NLevel3 SDA system, providing GR-303 voice, high-speed data and digital video services in the Phoenix area.
The Bell Atlantic contract includes a commitment to purchase 1 million fiber-to-the-curb lines with a provision to purchase up to 5 million lines. The NLevel3 SDA system is now in use in the Boston area and expected to be deployed in the New York metropolitan area this quarter.
"This transaction gives General Instrument shareholders the best of all worlds," said Edward D. Breen, Chairman and CEO of General Instrument. "We are now in partnership with the same fine firm that was a key investor in Ciena, in a structure giving GI shareholders and NLC employees very significant upside.
At the same time, NLC gets the funding and venture capital expertise it needs to achieve its enormous growth potential, while we at GI can focus exclusively on our world leadership position in cable and satellite TV without having NLC's planned R&D expenses continue to penalize our reported earnings."
Spencer Trask Chairman Kevin Kimberlin said, "Next Level, with its 'future proof' broadband-ready system, offers telephone companies new sources of revenues that customers demand, such as high-speed Internet access and digital broadcast video. This approach permits them to protect existing telephone revenues while inexpensively leveraging their large twisted-pair infrastructure with new data and video services. We are excited about Next Level because we see growth potential similar to the huge growth we experienced at Ciena."
"This is an ideal outcome for NLC's employees and customers, and is consistent with our previously announced plans," said Pete Keeler, who with Tom Eames co-founded NLC in 1994 and will continue as co-presidents. "We will have a smart technology partner behind us in Spencer Trask, GI's continuing support, our NLevel3 SDA system beginning mass deployment with key telephone companies, and real equity incentives for our people."
Based on the partnership structure, NLC's results will be deconsolidated from General Instrument. Accordingly, as previously announced, GI expects 1998 earnings of $0.65 to $0.75 per share before any one-time charges. In 1997, NLC's after-tax loss is expected to be over $30 million ($0.20 per share).
GI will record an after-tax write-off of approximately $45 million to fully reserve GI's loan to the new NLC partnership. This is in addition to the one time after-tax charges of $65-100 million ($0.42 to $0.64 per share) in the fourth quarter of 1997 and first quarter of 1998 that GI previously announced. GI will account for its interest in the NLC partnership as an investment under the equity method, and GI's share of expected 1998 and 1999 NLC losses from research and development will be set off against this write-off.
General Instrument Corporation is the world leader in analog and digital systems that provide video, audio and high-speed Internet/data services over cable and satellite television networks. Last month, GI announced that major cable operators expect to purchase at least 15 million of GI's advanced digital set-top devices over the next 3-5 years at an estimated value of $4.5 billion. Last week, GI announced a strategic alliance with Sony, which would include the purchase by Sony of 7.5 million new GI common shares at a price of $25 per share.
GI's cable and satellite TV operations have approximately 7,000 employees and annual sales of approximately $1.8 billion. With the name change to General Instrument Corporation, the Company's ticker symbol on the New York Stock Exchange will be changed to GIC from NLV on or about February 2, 1998.
Spencer Trask & Co. specializes in private equity for high-growth companies. The firm is known for financing leaders in software, telecommunications and healthcare.
The information set forth above includes "forward-looking" information and, accordingly, the cautionary statements contained in Exhibit 99, under the caption "Forward-Looking Information" in NextLevel Systems' quarterly report on Form 10-Q, for the three months ended Oct 31,1997 are incorporated herein by reference. NextLevel Systems' actual results could differ materially from the "forward-looking" information in this press release >>> |
