Calix, Inc. (CALX)
Acquisition of Fiber Access Assets from Ericsson & Companies Sign Global Reseller Agreement Conference Call
August 22, 2012, 05:00 pm ET
David Allen - IR
Carl Russo - President & CEO
Michael Ashby - EVP & CFO
Blair King - Avondale Partners
Mark McKechnie - Evercore Partners
Amitabh Passi - UBS
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Greetings and welcome to the Calix Conference Call Announcing the Signing of a Definitive Agreement under which Calix will acquire the Fiber Access Assets from Ericsson and the signing of the Global Reseller Agreement between the two companies. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, David Allen, Director of Investor Relations and Treasurer of Calix. Thank you Mr. Allen, you may begin.
Good afternoon everyone and thank you for joining us on short notice for today's call. Before we begin the call, I want to remind you that this conference call contains forward-looking statements regarding future events, including but not limited to our pending acquisition of the Fiber Access Assets from Ericsson and the signing of a Global Reseller Agreement between the two companies and the growth opportunities and potential benefit of this transaction.
These statements involve risks and uncertainties including the risk that the parties will not proceed with the transaction for any reason that the ultimate terms of the transactions will differ materially from those currently contemplated that Calix will not successfully develop and sell the new products and services; that the degree of competition in the markets for such products and services will be greater than anticipated that Calix will be unable to successfully integrate the acquired assets and new employees into our business and other risks detailed in our press release today and our annual report on Form 10-K for the year ended December 31, 2011 and our Form 10-Q for the quarter ended June 30, 2012.
These risk and uncertainties could cause actual results to differ materially from those outlined in the forward-looking statements which maybe made during the call. All forward-looking statements made as of the date of this conference call and except as required by law, we do not intend to update this information. This conference will be available for audio replay in the Investor Relations section of the Calix website at www.calix.com.
I would now like to turn the call over to Calix’s President and CEO, Carl Russo. Carl?
Thank you, Dave. Good afternoon, everyone. Joining me on the call today is Michael Ashby, our Executive Vice President and Chief Financial Officer. Earlier today, we announced that Calix has entered into agreements with Ericsson that will add new products to our unified access portfolio and create a powerful channel for deployment of Calix systems and software in 180 countries world-wide.
Specifically, we signed two agreements. The first is a definitive agreement for Calix to acquire Ericsson’s Fiber Access portfolio and remaining assets. The second is a Global Reseller Agreement under which Calix will become Ericsson’s preferred global partner for broadband access applications allowing Calix to sell its unified access systems and software through Ericsson’s global sales force.
We view these announcements as important and positive developments for Calix, our customers and our investors for primarily two reasons. The first is that this partnership positively affects our growth trajectory, accelerate and derisk our international market expansion and immediately establishes Calix currently North America’s fiber access deployment leader and a truly global access systems and software vendor with a diversified customer base worldwide including many Tier 1 customers.
And second, this aligns Calix with Ericsson, the world’s leading wireless equipment and services vendor. As the world’s communications networks continue to transform into all IP services via Ethernet over fiber and wireless. The alignment of the best-in-class vendors of wireline and wireless technologies is both powerful and strategic for our customers.
I will come back and add some closing comments. And at this time, I would like to turn it over to Michael Ashby. Michael?
Thank you, Carl and good afternoon everyone. My prepared remarks will be very brief. The acquisition transaction is expected to close during the fourth quarter of 2012. Financial terms of the transaction are not being disclosed. After the close of the transaction, we expect the acquired assets will be accretive to non-GAAP diluted earnings per share. Since the transaction is not expected to close during the current quarter, there will be no impact on our Q3 results. We will give guidance that includes the impact of today’s announcement during our third quarter earnings call or when the transaction closes after our Q3 earnings call.
The essential elements of the transaction are as following: Calix acquired the EDA 1500 GPON platform and associated ONT’s from Ericsson and will take over the manufacturing and continued development of that platform. This platform and its ONT’s will become part of an expanded Calix unified access portfolio of systems and software. Calix will also bring on board up to 61 former Ericsson employees all of whom are based in Silicon Valley.
The Global Reseller Agreement builds on the acquisition agreement establishing Calix as Ericsson’s preferred global partner for broadband access applications. This allows Ericsson to sell Calix’s unified access systems and software now including the EDA 1500 and associated ONTs through Ericsson’s global sales channels in 180 countries around the world. The majority of Ericsson’s current customers are large international tier-one accounts so that new resell channel compliments very nicely our existing international expansion activities which continue to focus predominantly on tier-II and tier-III customers globally.