Corvis acquiring Dorsal Networks

Stock deal valued at nearly $90 million

January 30, 2002|By Meredith Cohn | Meredith Cohn,SUN STAFF

Corvis Corp. announced yesterday that it has signed an agreement to buy Dorsal Networks, a privately held undersea optical network provider, for nearly $90 million in stock.

Corvis, which sells mainly land-based telecommunications equipment, offered 40 million shares of common stock for the company, excluding a 3 percent stake Corvis already had in Dorsal.

Corvis officials said the move would allow the company to nearly double its market opportunities by moving full force into the $6 billion undersea transport equipment industry.

Both companies are based in Columbia.

"Through this acquisition, Corvis will bring compelling solutions to a market that is looking for alternatives," said Terry Unter, Corvis' chief operating officer.

"We will deliver optical backbone solutions that maximize network efficiencies regardless of where continents and oceans begin and end."

Analysts during an evening conference call questioned the timing of the acquisition because sales in the industry have been lackluster.

Jay Ritter, an analyst at Morningstar Inc., said the acquisition could position Corvis to capture more business once the industry recovers.

Market `very weak'

He said he did not expect conditions for makers of land- or sea-based equipment to improve until at least 2003, however.

"The market is very weak right now; it's very possible they are getting ready for when the market improves," he said.

"A significant percentage of sales to date come from a couple of carriers. So the challenge for them is to expand their customer base and get through this period where industry demand is weak for their products, even though the technology has been considered kind of leading edge."

Inside advice?

Dorsal, founded in August 2000, employs some former Corvis executives, several of whom may have given Corvis officials insight into Dorsal's operations and persuaded those officials to go ahead with the purchase now, Ritter said.

Corvis officials said the companies could operate more efficiently as one unit, benefit from each other's technologies and more easily enter new markets.

Corvis shares fell 8 cents to $2.18 yesterday.

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