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Netopia Nabs Cayman For Less Than $17 Million

The digital subscriber line (DSL) router market got a little smaller Wednesday when Netopia Inc. moved to purchase competitor Cayman Systems Inc. outright for under $17 million.

Officials for the DSL router manufacturer said the purchase would include the payoff of all Cayman debts outstanding and the various paperwork and infrastructure changes needed at the combined company.

The merger is expected to close next month.

Alan Lefkof, Netopia president and chief executive officer, said in a conference call Wednesday afternoon the merger will increase the profitability of both organizations.

"By combining volume from both companies, we'll be able to get some good cost savings at the manufacturer level," Lefkof said. "From a cost point of view, we have a good enough management information system (MIS) and administrative functions to save on costs, letting us focus more on areas like customer support."

Under terms of the deal, Netopia will pay $11 million to take on all of Cayman's costs. That figure might change due to the liabilities at the time the merger process ends. Between $4 million to 6 million will be spent on integration costs.

Netopia plans to keep Cayman's Billerica, Mass., plant open.

Netopia has reasons for the acquisition of debt-heavy Cayman beyond shrinking the competitive field and adding new products to its own line. Cayman's attractiveness, in spite of the $11 million price tag, is its clientele, which includes two of the four incumbent local exchange carriers (ILECs) in the U.S. -- SBC Communications Inc. , and BellSouth -- as well as Comcast , the third-largest cable operator in the U.S.

John Stephens, one of Cayman's founders and currently its chief technology officer, was one of the senior management officers named to continue working with the merged entity. He will work with both Michael Trupiano and Tom Skoulis, Netopia senior vice presidents and general managers of the Internet equipment group and Web platform groups, respectively, as the chief technology officer of network interconnectivity.

Stephens is a proven leader in the DSL community, not only as a 14-year veteran at the helm of Cayman, one of the industry leaders in gateway router products for the home and at the carrier level. He has been working for years with DSL Forum, an organization of manufacturers, Internet service providers (ISPs) and software makers looking to provider DSL standards. While there, he has chaired the technical working group and authored several papers.

Peter Vicars, Cayman president and chief executive officer, said the combined efforts and products of both companies make it a very attractive company for DSL companies looking to buy gateway equipment.

"Netopia's financial resources, products and current customer base complement Cayman's products and distribution channel," Vicars said. "Both Cayman and Netopia have worked hard to earn their reputations for delivering excellent products and excellent customer service. The combined enterprise will be a strong market leader for both business class customer premise equipment (CPE) and the rapidly emerging market for broadband residential gateway products."

Netopia has been able to weather the financial storm that has affected many DSL equipment makers. At a time when many industry giants, like 3Com and Cisco Systems Inc., have announced their withdrawal from particular DSL router product lines, Netopia has been able to keep its market standing. Officials concede that only a few companies remain that provide true competition in these areas. They include Efficient Networks and 2Wire.