JDSU Buys Arieso For $85M In Cash To Boost Its Mobile Network Business

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This morning, JDSU, a specialist in optical networking software, announced that it would pay $85 million in cash to acquire Arieso, a UK-based startup that makes location-aware networking software to improve mobile carriers’ network performance. Arieso’s clients include AT&T, Telefonica, MTN in Africa and Vodafone Group.

The deal will mean that JDSU, which has up to now focused on broadband solutions, will move deeper into mobile. It says that the mobile networking market is worth $700 million today and will grow to $1 billion by 2015 as the world continues to move to using smartphones and tablets — pushing the limits and usage of mobile networks in the process.

It’s a pretty impressive exit in the mobile infrastructure space: Arieso has reported just $2.21 million $12.6 million from backers that included Qualcomm Ventures. (Update: In addition to the $2m+ raised in 2004, there was a $10m round in 2008 from existing backers, per LightReading.)

Part of Arieso’s business is focused on producing reports on how the use of different devices affects network performance and data traffic. A recent piece of notable research for example compared data consumption from different smartphone and tablet devices — finding that the iPhone 5 and Samsung Galaxy S III used the most data of all, including media-friendly tablets (although considering that many use tablets on WiFi rather than cellular networks, this may not be as big a surprise as you might think).

JDSU says that it will integrate Arieso’s radio access network products into its existing product set.

“We’re excited about the complementary fit between Arieso and JDSU and the opportunity to extend the customer-centric location aware approach into the service and application domains, allowing mobile network operators to take a truly holistic approach to driving customer experience improvements,” said Shirin Dehghan, Arieso’s CEO, in a statement.

It looks like Arieso will stay put in Newbury, England, and all of its 100 employees are making the transfer.

Full release below.

JDSU Acquires Location-Aware Mobility Solutions Provider Arieso

Acquisition Advances Mobile Strategy with Software Solution that Extends
Mobile Network Visibility Beyond the Edge

Milpitas, Calif., March 8, 2013 – JDSU (NASDAQ: JDSU and TSX: JDU) today announced it has acquired Arieso, a global leader in location-aware software solutions that enable mobile network operators to boost 2G, 3G and 4G/LTE network performance and enrich the mobile subscriber experience. JDSU acquired Arieso for $85 million in cash.

Headquartered in Newbury, United Kingdom, Arieso brings high-caliber mobile software engineering expertise to JDSU to address the rapidly growing deployment of small cells and challenges associated with limited spectrum capacity. Adopted by leading wireless network operators and equipment manufacturers, Arieso’s solutions locate, store and analyze data from billions of mobile connection events that translate into rich intelligence to help mobile operators optimize network performance, improve customer experience and create new revenue-generating services.

The acquisition advances JDSU’s mobility strategy by extending visibility all the way to the subscriber location, providing critical intelligence that allows radio access network (RAN) optimization teams to maximize return on investment by identifying ideal locations for small cells and other self-optimizing network enhancements with surgical precision, across the widest range of technologies and vendors.

JDSU will integrate Arieso’s products with complementary solutions such as PacketPortal, JDSU’s open software platform, providing end-to-end visibility across mobile networks. Arieso’s products enhance the value of PacketPortal by enabling it to capture network intelligence beyond the edge, creating a competitive advantage for mobile network operators and equipment manufacturers seeking a more cost-effective way to improve mobile service and reduce churn.

“We’re excited about the complementary fit between Arieso and JDSU and the opportunity to extend the customer-centric location aware approach into the service and application domains, allowing mobile network operators to take a truly holistic approach to driving customer experience improvements,” said Shirin Dehghan, Arieso’s CEO.

Arieso’s products address the RAN optimization and self-optimized networks (SON) markets, expected to grow from approximately $700 million today to more than $1 billion by 2015. Arieso’s bookings for calendar 2012 were approximately $27 million. Due to the effect of purchase accounting on deferred revenue existing at close and ratable revenue recognition for new software sales under US generally-accepted accounting principles (GAAP), the transaction will contribute nominal revenue in the remainder of JDSU’s third quarter of fiscal year 2013, and result in an incremental expense on a non-GAAP basis of $1-2 million.

“Arieso’s mobility expertise, market leadership and culture of innovation are directly in line with our strategy to deliver unmatched network visibility and intelligence to our customers,” said David Heard, president of Communications Test and Measurement at JDSU. “They are a recognized mobility leader and, as part of JDSU, create new, unique opportunities for innovation in one of the fastest-growing segments of the market.”

New Products for JDSU

With the acquisition, JDSU will expand its portfolio of high-value mobility software with the following solutions:

· AriesoGEO – Multi-vendor, location-aware network monitoring and optimization solution that delivers intelligence for more effective network performance engineering.
· AriesoACP – Automated network planning technology that searches all possible configurations to deliver optimum network designs.

Both solutions leverage Arieso’s proprietary algorithms that provide highly rich and targeted data from mobile connection events that give mobile operators visibility into service level activity and usage patterns.
JDSU also announced that it will be issuing grants of compensatory restricted stock unit awards to employees joining JDSU in connection with the acquisition. The restricted stock unit awards to be granted to those employees by JDSU are generally comparable to equity awards that JDSU grants to its similarly situated new employees. These grants were made under the JDS Uniphase Corporation 2005 Acquisition Equity Incentive Plan, which was approved by the Board of Directors of JDSU, but not submitted for the approval of the stockholders of JDSU.

These restricted stock unit awards were approved by the JDS Uniphase Corporation Board of Directors on March 1, 2013, with such approval being further subject to the close of the acquisition. Pursuant to such approval, on March 15, 2013, JDSU will award restricted stock units covering a total of 207,880 shares of JDSU common stock. Awards will be granted to 12 employees.

The restricted stock units to be granted will contain the same terms and conditions as the standard form of restricted stock unit award agreement previously approved by the Board of Directors of JDSU. The material terms of the standard form of restricted stock unit agreement are as follows. Restricted stock units vest over a three (3) or four (4) year period in equal annual installments commencing upon the first anniversary of the grant date subject to the continuous active service of the grantee.

About JDSU
JDSU (NASDAQ: JDSU; and TSX: JDU) innovates and collaborates with customers to build and operate the highest-performing and highest-value networks in the world. Our diverse technology portfolio also fights counterfeiting and enables high-powered commercial lasers for a range of applications. Learn more about JDSU at http://www.jdsu.com and follow us on JDSU Perspectives, Twitter, Facebook and YouTube.