DALLAS - DZS Inc. (NASDAQ:DZSI), a global provider of broadband networking and cloud software solutions, today announced its definitive agreement to purchase NetComm Wireless Pty Ltd, a company specializing in broadband technology. This strategic acquisition is set to enhance DZS's portfolio with NetComm's Fiber Extension, Fixed Wireless Access, Home Broadband, and Industrial Internet of Things (IoT) offerings.
The acquisition is expected to be finalized in the second quarter of 2024 and will incorporate a majority of NetComm's workforce, with a focus on research & development and customer care. NetComm, a company with a history of innovation in broadband access technology, serves approximately 50 active customers across diverse regions including the United States, Canada, Latin America, Europe, Australia, and New Zealand.
DZS will pay $7 million upon closing for NetComm, including its intellectual property and inventory. An additional earn-out of up to $3 million is contingent on NetComm achieving a net revenue of $87.5 million in 2024, with the earn-out structure starting at $72.5 million of net revenue.
The transaction is geared to position DZS as a leader in last-mile broadband access, combining its optical, access, subscriber, and cloud edge portfolio with NetComm's technologies. This move is expected to bolster DZS’s ability to meet the growing demand for broadband services.
Charlie Vogt, President, and CEO of DZS, emphasized the alignment of the acquisition with the company's vision to lead in broadband networking and cloud software management solutions. He also highlighted the significance of integrating NetComm’s team and their technological expertise.
NetComm, established in 1982, has been recognized for its contributions to 5G fixed wireless, home broadband, fiber-extension, and IoT technologies. Its products have been instrumental in providing gigabit broadband speeds and networking connectivity across various platforms.
DZS will host an investor call on Tuesday to discuss the details of the acquisition further. This move by DZS is based on a press release statement and represents a significant development in the broadband networking industry, with the potential to enhance connectivity solutions globally.
InvestingPro Insights
DZS Inc. (NASDAQ:DZSI) has recently made headlines with its acquisition of NetComm Wireless, a move that’s expected to strengthen its broadband and cloud software portfolio. As the company embarks on this strategic initiative, it’s important for investors to consider the financial metrics and market sentiment that could impact DZS's performance.
InvestingPro data indicates that DZS has a market capitalization of $47.7 million, reflecting the company's current valuation in the market. However, the firm is grappling with profitability challenges, as suggested by a negative P/E ratio of -0.74. The operating income margin for the last twelve months as of Q1 2024 stands at -10.14%, further underscoring the financial hurdles the company faces.
When it comes to stock performance, DZS has experienced significant downturns. The 1-year price total return as of a recent 2024 date is at a steep -83.91%, with the stock currently trading at just 17.09% of its 52-week high. This is echoed by the recent price trends, with a 1-month price total return of -18.08% and a 6-month return mirroring the 3-month return at -31.73%.
InvestingPro Tips highlight several key points for potential investors. DZS suffers from weak gross profit margins, which could be a concern for those looking at the fundamental health of the company. Additionally, the stock has fared poorly over various time frames, including the last month, three months, six months, and the last year. On a positive note, analysts predict the company will be profitable this year, which may offer a glimmer of hope for future financial stability.
It’s also worth noting that DZS does not pay a dividend to shareholders, which can be a significant factor for income-focused investors. With these insights, those interested in DZS's future prospects may wish to delve deeper into the company's financials and market performance. For more detailed analysis and additional InvestingPro Tips, visit https://www.investing.com/pro/DZSI and consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 6 more InvestingPro Tips available that could provide further guidance on the investment potential of DZS Inc.
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