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.

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