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    HomeInsightsDragonwave cuts new microwave deal with NSN

    Dragonwave cuts new microwave deal with NSN

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    DragonWave has announced that its acquisition of NSN's microwave business will not now include NSN's Italian assets, and will not include a full transferral of NSN's microwave R&D activities. The new deal terms appear to significantly reduce the number of employees that will be transferred from NSN to Dragonwave.

    Originally the companies said that 360 employees, mainly based in Milan, Italy and Shanghai, China, would transfer to DragonWave in a deal that was due to close in 1Q 2012. The Milan operation will not now be transferred. Approximately 130 employees based in Shanghai will, however, transfer to DragonWave in the second half of 2012, once all of the licenses and permissions to do so are in place.

    The two companies also announced that they would enter into a service agreement that will see NSN provide R&D, product management and sales support to DragonWave. At the end of the service agreement period, the Italian assets may yet be transferred to DragonWave. Previously the companies had said that Dragonwave would take control of R&D and product development, with NSN acting as a sales channel. 

    DragonWave said it would now be paying €11.7 million euros in cash, and €5 million in shares, for the microwave assets. DragonWave will also acquire other assets under a capital asset lease or other deferred sale arrangements with a value of approximately €3.6 million. The companies have scrapped an earn-out payment that would have been tagged to sales performance.

    The original public sale price was for a combined cash and share offer of €15 million.

    The amended terms appear designed to reduce DragonWave's operational expenses in the near future, by keeping a substantial block of NSN's Italian employees off DragonWave's books. A statement from Dragonwave said that the amendments had been made "to provide both companies with greater flexibility to adapt to changing market environments."

    DragonWave reported that revenue for the full fiscal year 2012 was $45.7 million, compared with $118.0 million for the prior fiscal year. That translated to a loss of $33.5 million for the year.