Analyst ponders recent blockbuster deals

Feb. 6, 2004
Feb. 6, 2004 - BSRIA researcher Lone Hansen says product-line changes can be a benefit of the CommScope-Avaya acquisition and the Belden-CDT merger.

Contractors for years have been purchasing product
lines from Belden Inc., Cable Design Technologies,
CommScope Inc. and Avaya Inc. Now, the future of some
of these product lines could be changing in the wake
of two significant mergers.

In the past seven days, CommScope (,
based in Hickory, NC, completed the acquisition of the
Connectivity Solutions business of Avaya.
( The acquisition became effective on
Jan. 31.

Just a few days later, Belden Inc. (,
based in St. Louis, MO, announced the company and
Cable Design Technologies (CDT) (, based
in Schaumburg, IL, have formed a "merger of equals."
The combined company, with sales of about $1.3
billion, will be called Belden CDT.

Both mergers will give each pairing of companies a
more significant presence in Europe, and certainly a
more significant presence in North America. Lone
Hansen, manager of IT Cabling and Contracting
Worldwide Market Intelligence for BSRIA
(, based in the United Kingdom, says
CDT, for example, has 13% of the market share in North
America. Belden, meanwhile, has 7% of the share. The
two together will have a significant 20% of the market
share. "They will be stronger," says Hansen.

The mergers undoubtedly raised eyebrows for
contractors, many of whom could regularly purchase the
companies' products from distributors who deal in the
overly fragmented market. The companies say
distributors will continue to offer all lines of
products. Phil Armstrong, vice president of investor
relations for Corporate Communication for CommScope,
for example, says that both CommScope and Avaya brandsof connectivity solutions and cable for Hybrid Fiber
Coaxial applications will remain available.

"I think that they they (contractors) will still have
options, and that is good thing," says Armstrong.

Hansen believes this, for the most part, and says the
companies for now have little choice. She says
seemingly competing product lines will continue to be
seen on distributor shelves. "More or less, these
companies have a significant presence there (with
distributors) anyway, and I don't think that will be a
big change," says Hansen.

No plans have been made concerning the certified
training programs offered by each. And both companies
say they have no immediate plans to discontinue
product lines.

But there is certainly a degree of uncertainty today
as the companies consider their futures. And both
sides are hinting at pending change. CommScope, for
example, states the acquisition puts it in a position
to build on the popular SYSTIMAX Solutions product
line with "complementary technologies."

This could work to the best, as Hansen says it would
be a mistake if the companies did not make product
line changes. She says both merged operations should
now be looking into the development of branded product
lines, with one company name being attached to that
product. This is particularly true for Belden CDT,
which could soon see CDT operations from Canada to the
United States and under one new umbrella. "I don't
know what their plans are, but I think if they want to
have a bigger presence globally, they had better have
one brand," says Hansen. "It would give them a
stronger profile or position."

She also says promises that all product lines will
continue should not be taken too seriously. "We'll
have to wait and see what they are doing," says

Making changes would not necessarily be a bad thing
for the industry at large, Hansen adds. She says these
two significant mergers won't be the last in the near
future. Hansen says cable and cable component sales
are expected to be flat in the next five years, and
the market itself has already dropped by 40% in the
past two years. Cable manufacturers are facing a lot
of pressure to cut costs, and manufacturers in the
United States face increasing competition from
manufacturers in Asia.

"There is a lot of pressure on supplier erosion in the
cabling connectivity industry," says Hansen.

Hansen says newly merged operations such as these
could help pump much-needed new blood into the
industry. And it's an industry that should now be
revitalizing itself by building new, more value-added
products. Cable manufacturers should now be pushing
for the development of more 50-micron optical fiber,
and superior Category 6 cable, for example.

"They must increase new business areas, get better
value, and offer more management systems," says
Hansen. "These would be more expensive, and increase
their profits and their revenues."

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