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Proxim Puts $223 Million on the Table for Netopia

Wireless broadband networking company Proxim Inc. Wednesday made a $223 million stock-for-stock play for broadband Internet equipment developer Netopia Inc. with the aim of speeding deployment of broadband wireless, cable and DSL services.

Proxim will exchange .3 shares of Proxim common stock for each common stock share of Netopia , which adds up to about $223 million based on Proxim's closing price of $36.87 Tuesday. The company's share price dropped to $33 in after-hours trading once it announced the merger.

Proxim will account for the merger as a purchase and said it expects to close the deal late first quarter or early second quarter 2001. Proxim said it expects the merger to be accretive for the first full year of combined operation.

"The merger with Netopia broadens Proxim's broadband networking strategy by providing Proxim access to DSL and other major loop technologies," said David King, chief executive of Proxim. "Proxim will develop fully integrated voice and data networking solutions, providing total flexibility and choice in broadband access. Plus, it gives Proxim expanded distribution to telecom-, datacom- and cable-oriented service providers."

Upon completion of the merger, Proxim will be able to offer its customers a broad array of WAN/LAN technology solutions designed for self-installation while supporting voice, data and streaming media applications.

"This exciting combination of Netopia and Proxim expands the market for Netopia's products, extends Proxim's solutions to small and medium-sized businesses and will result in joint international expansion," said Alan Lefkof, CEO of Netopia. "Looking forward we expect to provide wireless, voice and data solutions to residential as well as small and medium-sized business customers."

Lefkof will shift from his present role into Proxim's chief operating officer position. He will also take a seat as co-chairman of Proxim's board. King will retain his position as CEO and will join Lefkof as co-chair of the company. Other management moves were not announced.

At least one analyst seemed confused by the deal. In the wake of the announcement, WR Hambrecth + Co.'s Tim Savageaux shifted his buy rating on Netopia to an arbitrage negative position, saying he didn't foresee positive investment returns as a result of the merger. He also said Netopia could have gotten a higher price while still being accretive to Proxim. The market, however, has reacted favorably. Netopia's share price climbed 13 percent to $9.25 in early trading Wednesday. Proxim's price did not fare so well, dropping to $31.43 off its open of $33.

Still, longtime Proxim customers Motorola and Siemens said they were pleased by the prospects of the merger.

"The combined forces of Proxim and Netopia will accelerate the availability of wirelessly enabled xDSL broadband gateways and client access devices with highly integrated voice, data and streaming capabilities," said Christophe Caselitz, president of Cordless Products, Information and Communication Mobile for Siemens, Munich. "The depth of Siemens' existing strategic technology and marketing partnership with Proxim will be enhanced even further by the addition of Netopia's IAD (Integrated Access Device) and other local loop products."



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