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ADC, Andrew in $2B Networking Marriage

Consolidation is still the watchword in the telecommunications industry. Fiber optics player ADC Technologies announced a $2 billion all-stock acquisition of Andrews, a smaller wireless infrastructure provider.

The deal would create a provider of wireline and wireless communications with over $3.3 billion in sales a year, the companies said. About 44 percent of those sales will be for wireless equipment.

The new company is to be named ADC Andrew and also expects itself to be leaner by between $70 million to $80 million by the third year of the marriage.

"The customer base is becoming one," ADC CEO Robert Switz said during a conference call and Webcast today. The deal is yet another sign of consolidation in an industry that just witnessed the $16 billion merger of AT&T and SBC and Verizon's $8.4 billion purchase of Verizon.

Switz, who will become the CEO of the new company to be based in Minneapolis, told analysts that wireless and wireline services will be an advantage for the new effort.

"With accelerating globalization and consolidation among telecommunications service providers and communications equipment suppliers, now is the right time for ADC and Andrew to join forces," Ralph Faison, CEO of Westchester, IL-based Andrew told reporters. As Andrew becomes an ADC subsidiary, Faison will serve as consultant during the transition, according to a statement.

Although more than 40 percent of customers will be wireless, 24 percent will be original equipment manufacturers, 23 percent will be wireline and enterprise customers will make up six percent.

Reaching more than 140 countries, the U.S. and Canada will lead sales, followed by Europe, Middle East and Africa, Asia and Latin America. "We can be in a much better position in the Asian market," Switz told analysts.

While ADC Andrews will employ 20,000, the merger "will certainly result in some head count reductions," said Gokul Memmady, ADC's chief financial officer. He didn't provide figures. ADC and Andrew have manufacturing plants in Mexico and Asia, accounting for more than a third of its workforce, according to the companies.

ADC also reported $366 million in sales during the second quarter of 2006, a four percent increase over last year and 30 percent jump from the first quarter of the year.

Fiber connectivity lead the sales increase with a 91 percent spike in growth. Copper-based connectivity saw a 24 percent jump. ADC in 2005 paid $172 million for FONS, a fiber optic equipment maker.

Earlier this year, ADC acquired G-Connect, an Israel-based developer of ISP-related gear.

But Switz said those purchases "are a completely different pattern and strategy" from businesses ADC acquired in the 1990s.