Aviat (AVNW) Closes NEC Deal for Higher Scale of Operations
Aviat Networks, Inc. AVNW recently completed the acquisition of the Wireless Transport Business of NEC Corporation for $65.5 million, including $42.1 million in cash and $23.4 million in stock consideration. The buyout is likely to be accretive to Aviat’s earnings with improved scale of operations, enhanced portfolio depth and diversified businesses.
With a complementary product portfolio of high-power, mission-critical radios, all-outdoor microwave and multi-band radios, advanced microwave routers and software offerings, the combined entity will have a diversified business serving more than 20 Tier 1 service providers worldwide. Aviat will aim to leverage NEC's wireless transport solutions brand, PASOLINK, which boasts more than 3 million shipments globally, to augment its exposure to global 5G spend and private network opportunities.
The enriched bouquet of service offerings is likely to significantly increase the reach of Aviat's global business. The improved scale of operations is expected to generate an additional $150 million in revenues, which will be accretive to adjusted EBITDA, non-GAAP earnings and free cash flow by the end of the first year. The acquired business is further likely to generate 11-13% EBITDA by the end of the second year.
The buyout is likely to strengthen its position as one of the leading wireless transport specialist firms in the world. Aviat is set to revise its guidance for fiscal 2024 after incorporating the positive impact from the transaction and will issue the same in concurrence with the fiscal second-quarter results.
Headquartered in Austin, TX, Aviat is a global provider of microwave networking solutions. It offers public and private operators communications networks to cater to the accretive demand for IP-centric, multi-gigabit data services. Backed by avant-garde technology, Aviat simplifies the entire lifecycle of designing, deploying and maintaining wireless transport networks with greater performance and reliability.
The company is well-positioned to benefit from robust market dynamics, cost-reduction efforts, favorable customer mix and higher investments in innovative software solutions. A solid liquidity position and healthy balance sheet are likely to aid the company in executing key long-term strategic objectives.
The stock has lost 7.7% in the past year compared with the industry’s decline of 7.5%.
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Zacks Rank & Other Key Picks
Aviat currently carries a Zacks Rank #2 (Buy).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Comtech Telecommunications Corp. CMTL, carrying a Zacks Rank #2, is another solid pick. Headquartered in Melville, NY, the company is a leading global provider of next-generation 911 emergency systems and secure wireless communications technologies to commercial and government customers.
Comtech’s key satellite earth station modems incorporate forward error correction and bandwidth compression technologies, which enable its customers to optimize their satellite networks by either reducing their satellite transponder lease costs or increasing data.
Arista Networks, Inc. ANET, carrying a Zacks Rank #2, is likely to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista has a long-term earnings growth expectation of 20.4% and delivered an earnings surprise of 12%, on average, in the trailing four quarters.
It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed datacenter segment. Arista is increasingly gaining market traction in 200- and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.
AudioCodes Ltd. AUDC carries a Zacks Rank #2. It has a long-term earnings growth expectation of 24.8% and delivered an earnings surprise of 14%, on average, in the trailing four quarters.
Headquartered in Lod, Israel, AudioCodes offers advanced communications software, products, and productivity solutions for the digital workplace. It provides a broad range of innovative products, solutions and services that are used by large multi-national enterprises and leading tier-1 operators around the world.
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