ADC acquiring fiber-to-the-premises rival

In a $172 million cash transaction, ADC (www.adc.com) is set to purchase Fiber Optic Network Solutions (FONS; www.fons.com), a company that ADC has frequently bid against for fiber-to-the-premises system contracts.

The deal was announced July 22, and was scheduled to close 30 to 90 days thereafter.

Exemplifying the sharp uptake expected in the overall fiber-to-the-premises market beginning this year, FONS anticipates 2005 sales of $95 million, up from approximately $34 million last year.

“FONS is a high-quality connectivity business that fits well with our strategy for capturing the strong growth potential of the FTTX market, which is in the early stages of its growth curve,” said ADC president and chief executive officer Robert E. Switz at the time the sale was announced. “This acquisition more than doubles our FTTX outside-plant business to greater than 10% of total ADC sales.” In a conference call the day of the announcement, ADC executives explained that ADC, FONS, and Corning are three system providers for Verizon’s fiber-to-the-premises initiatives.

A Verizon spokesman confirmed that the three companies are among a group of eight or nine fiber-to-the-premises solution providers.

Switz added that the acquisition’s strategic value comes from combining ADC’s global scale, worldwide customer base, and distribution channels with FONS’ advancements in fiber connectivity solutions.

Explaining the nuances of the two companies’ sales structures and their practical implications on the organizations’ processes and customers, Pat O’Brien, president of ADC’s global connectivity business unit, said, “Both sales teams are structured essentially the same. ADC has approximately 150 salespeople and FONS approximately 10, focused primarily on Verizon and SBC.” He says any potential rationalization of the sales force will be eventual as opposed to immediate.

Both ADC’s OmniReach and FONS’ Pathways fiber-to-the-premises systems will remain in the sales channel, because ADC has no plans to discontinue either line, the company said. O’Brien further explained, “We’ll put our engineering expertise to use in development” of product lines, which “have a short life cycle of 6 to 12 months.”

O’Brien added, “The hallmark of ADC and FONS has been to take instruction from our customers. We’ll continue to do that and continue to be responsive to those customers.”

While outside-plant public networks and fiber-to-the-premises in particular are the nucleus of the acquisition, O’Brien foresees the deal aiding ADC’s standing in the premises marketplace as well: “Today, ADC has a small percentage of the enterprise fiber market.” The legacy of FONS, he stated, is that the leadership team has developed enterprise fiber units for very well-recognized enterprise cabling vendors. ADC plans to capitalize on FONS’ capabilities and know-how, to help accelerate ADC’s ability to succeed in the enterprise market.

The expertise coming from FONS will be added to that which came when ADC acquired Krone last year, placing it firmly in the enterprise cabling market. Krone/ADC’s CopperTen unshielded twisted-pair cabling system was the first UTP system to market that aimed to support the impending 10GBase-T specifications.

Based on O’Brien’s comments about FONS, ADC aspires to make just as big an impact on the optical side of the business.

-Patrick McLaughlin