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DragonWave buys Axerra Networks to diversify

OTTAWA - DragonWave Inc. (TSX:DWI) has acquired U.S.-based Axerra Networks Inc. for US$9.5 million in an effort to diversify the Ottawa-based telecom equipment maker's customer base.

OTTAWA - DragonWave Inc. (TSX:DWI) has acquired U.S.-based Axerra Networks Inc. for US$9.5 million in an effort to diversify the Ottawa-based telecom equipment maker's customer base.

The acquisition will open up additional markets globally, including the United States where Axerra has a large cable company as a customer, DragonWave chief executive Peter Allen said Thursday.

"We're looking for strong growth from this," Allen said told financial analysts Thursday on a conference call.

"This acquisition represents a key step in our customer and portfolio diversification strategy," he said.

The Ottawa-based company is trying to reduce its reliance on U.S.-based carrier Clearwire for the bulk of its revenues.

Clearwire is building a fourth-generation network designed to given a faster Internet experience at home, work or on the go and will cover 120 million people in major U.S. cities by the end of this year.

Allen didn't name the U.S.-based cable company, but signalled it's important for future growth.

"The confidence demonstrated by this customer gives us, in turn, the confidence we can work together to grow this business."

Axerra's product line includes network gateways and access devices that can bridge the technology gap between a carrier's new and legacy services such as voice calls.

DragonWave's microwave radio system equipment moves voice and data wirelessly between cell towers and networks and is compatible with emerging, faster networks designed to handle lots of data.

If Axerra meets revenue targets, the acquisition could be valued at US$15.5 million over the next 16 months, Allen said.

He said the all-cash transaction is expected to increase revenues for the third fiscal quarter to US$32.5 million from US$30 million.

Axerra has 61 employees and is based in Delaware, but most of its research and development employees are in Israel, Allen said.

"We are excited to join the DragonWave team, we believe our combined solution set will help enhance our product portfolio and expand the range of opportunities available to us in the future," said Hezi Lapid, CEO of Axerra.

Shares in DragonWave were up 10 cents at $8.03 in late morning trading on the Toronto Stock Exchange.

 
 
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