OTTAWA -- The chief executive of California's Integrated Device Technology Inc. was in town Wednesday to wrap up the acquisition of Solidum Systems and mum is still the word on the value of the deal. The five-year-old maker of telecom chips has officially become IDT Canada, erasing another homegrown brand from Ottawa's landscape. The deal, announced last month, followed a year-old partnership between the two firms to develop next generation packet processing products for telecom network equipment.
Greg Lang, IDT's president and CEO-elect, said after working closely together, IDT realized Solidum's products were likely to figure prominently in the next generation of the technology and decided to bring its products inhouse.
"We have a strong position in the market going forward,” he said.
At a time when the telecom industry as a whole is locked in a protracted slump expected to persist for at least another 18 months, any added traction is vital. IDT itself has suffered the same raft of layoffs as other players as it adjusts to lower customer spending. Last year it cut about 1,400 jobs, almost a third of its overall headcount. However it still managed to finish the fiscal year ended in June with about US$240 million in the bank.
Lang said Solidum's products are expected to start contributing to revenue within the next six to 12 months.
Outside of the advantages to IDT, however, neither company is all that forthcoming concerning the gain to Solidum's investors.
Over the past five years, Solidum has received a total of US$23 million in venture capital. Some media reports have estimated the value of the transaction at between US$10 million and $16 million. Lang said IDT has no intention of disclosing the value of the deal or commenting on how it shaped up in terms of return on investment. Solidum's investors included Vertex Management Israel, Nomura Securities, Intel Capital, Business Development Bank of Canada, Skypoint Capital and Formula Growth Fund.
"I think it's been received positively by both the employees and investors,” he said, adding that "it's a great opportunity in a difficult environment.”
Invariably, jobs will be lost in the integration of the two companies. Solidum will transform from being a fully functional company to a research and development centre. Sales will be handled by IDT's own department while admin personnel will be cut. Lang said the "vast majority” of Solidum's 75 staff will keep their jobs.
White: ‘Time to decompress'
Among the departures will be Solidum's chief executive, Rick White. This is the third company where he has held a senior management position that has become a takeover target. The others were Accelerix, acquired by Mosaid in 1999, and Extreme Packet Devices, bought by PMC-Sierra in 2000.
Sab Ventola, Solidum's VP of engineering, will take over the Ottawa operation as director of engineering and general manager. White said Solidum always looked at its partnerships from the perspective that if they were successful, could they lead to an acquisition? >
When he took the reins two years ago, an eventual IPO for the company was a definite possibility. Since then, however, the IPO climate has changed drastically and the hurdles have become too great. The key barrier was the company's lack of breadth in its product line, he said, leaving a takeover the only viable exit strategy for investors. Next week White heads to New Zealand and will take the next few months off to "decompress” before deciding on his next move.
"But I really like the startup environment and would like to do another one.”