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Network Instruments of Minnetonka to be acquired for $200 million

  • Article by: Patrick Kennedy
  • Star Tribune
  • December 11, 2013 - 9:17 PM

Silicon Valley-based technology company JDS Uniphase Corp. on Wednesday announced an agreement to acquire Minnetonka-based Network Instruments for $200 million in cash.

In an interview, Douglas Smith, CEO and co-founder of Network Instruments, said “we had a number of companies calling us. For some reason there was a big amount of interest in our type of technology all of a sudden.”

Smith said that his company initiated discussions in 2010 to merge into the California company, also known as JDSU. “We had a lot of discussion with them back then, but nothing happened,” Smith said.

In the meantime, Network Instruments was acquired by San Francisco-based private equity firm Thoma Bravo LLC, in April 2012. About a year later, JDSU renewed discussions with Network Instruments and Thoma Bravo, culminating in Wednesday’s announcement.

“We were one of the last assets in the marketplace that hadn’t been acquired that does what we do,” Smith said. Network Instruments provides network monitoring and performance management tools.

“We design computer hardware and software products .... that large enterprise customers use in their data centers to track the delivery of their applications and to troubleshoot the delivery of those applications when things go wrong.” Smith said. “The designing of the hardware and the writing of the software are things we actually do here in Minnesota.”

Network Instruments was founded in 1994 and has 125 employees and annual revenue of approximately $40 million. The company will become a part of the network and service enablement division of JDSU.

David Heard, president of the network and service enablement business at JDSU, said in a statement: “Network Instruments has outstanding new products and an excellent reputation across the enterprise market.”

JDSU operates a portfolio of technology companies from network management companies to high-powered commercial lasers to companies that provide security and anti-counterfeiting technologies in more than 90 countries. It has annual revenues of approximately $1.7 billion.

JDSU’s typical customer base has been carrier networks or service provider businesses like AT&T and Verizon, while Network Instruments’ typical customers have been enterprise businesses like Target, 3M and American Express.

“The combination is really quite complementary,” Smith said. “Their customer base has been these large carriers and our customer base has been the enterprise.”

Smith says there will be no layoffs associated with the transaction and that he and his management team have signed on to stay with the company, which will operate as an independent business unit of JDSU.

The $200 million acquisition price, five times Network’s annual revenue, suggests that JDSU foresees a big opportunity. JDSU has told Smith the company is committing to increased spending, including research and development and additional hiring for Network Instruments both locally and in their international offices.

“I think they see the potential,” Smith said. “The total addressable market for us is well north $1.4 of billion; they think they have the footprint and the horsepower to drive us deeper into the market.’’

The companies expect to close the transaction within 45 days. This is the sixth acquisition of a network management company by JDSU since 2010. Most recently it spent $85 million in March for Arieso, a British maker of software that allows mobile network operators to improve network performance.

Patrick Kennedy • 612-673-7926

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