EXFO expands protocol test capabilities with acquisition

MARCH 27, 2008 -- EXFO Electro-Optical Engineering Inc. has acquired all the shares of Navtel Communications Inc., a provider of IMS and VoIP test equipment.

MARCH 27, 2008 -- EXFO Electro-Optical Engineering Inc. (search for EXFO) has acquired all the shares of Navtel Communications Inc., a provider of IP Multimedia Subsystem (IMS) and voice-over-IP (VoIP) test equipment for network equipment manufacturers (NEMs) and network service provider (NSP) labs.

EXFO paid C$11.0 million in cash, subject to adjustments on working capital. EXFO says it expects the deal to be earnings neutral for the remainder of fiscal 2008 and accretive in fiscal 2009, excluding amortization of intangible assets to be accounted for in the acquisition.

Privately held Navtel Communications specializes in testing next-generation IP networks that combine wireline and wireless via IMS technologies. Its InterWatch platforms are designed to be fully scalable simulation and analysis test stations available in rack-mountable and portable formats. The platforms can perform several tests � for example, capacity, performance, stress, and load testing -- on various network devices to assure their ability to perform under real-life, IP-based, multimedia traffic conditions. Test modules can be hosted inside Navtel's platforms for characterizing next-generation switches, routers, session border controllers, and media gateways.

Navtel also offers a suite of VoIP and GMPLS test offerings as well as a wide range of legacy test protocols that have been developed over its 30 years of existence.

Frost & Sullivan, a global growth consulting company, estimates that the IMS test and monitoring market will grow from an estimated $274.1 million in 2007 to $1.2 billion in 2013 for a compound annual growth rate of 27.9%. Navtel currently addresses approximately $130 million of this market.

"This acquisition fits strategically with our long-term plan to deliver strong growth in our protocol test business, which posted a compound annual growth rate of 64% in the last two years and continues to deliver solid growth at the mid-point of fiscal 2008," said Germain Lamonde, EXFO's chairman, president and CEO. "Navtel's cutting-edge technology strengthens our offering for NEMs and NSP labs which, in turn, have a significant influence on product selections made by NSPs.

"This acquisition also enables us to expand into the high-growth IMS and VoIP test markets, whose technologies are currently in their early stages," Lamonde added. "We intend to leverage these technologies throughout their entire lifecycle, especially as they mature into portable test solutions for the NSP market in which EXFO is the world's second-largest supplier. We also plan to take advantage of Navtel's strong relationships with Tier-1 NEMs and leverage our own worldwide sales presence with NSPs to accelerate sales growth, while positively impacting earnings since Navtel's software-intensive test solutions generate high gross margins."

Navtel Communications posted sales of C$5.7 million in calendar 2007. Joe Sutherland, founder and CEO of Navtel Communications, and his senior management team will ensure a seamless integration into EXFO, the latter company says. No restructuring is planned, with all 35 Navtel employees expected to remain with the company.

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