McDATA to Acquire CNT

The combination of the companies' complementary products and services will provide customers with the long-term confidence that their strategic requirements for a storage networking infrastructure needed for increased productivity, business continuity and regulatory compliance will be met.

Under the terms of the agreement, which was approved by both companies' boards of directors, CNT shareholders will receive 1.3 shares of McDATA Class A common stock for each share of CNT common stock they hold. Upon completion of the transaction, which is expected in McDATA's fiscal second quarter 2005, McDATA and CNT stockholders will own approximately 76% and 24%, respectively, of the combined company.

Operating income improvement as a result of the merger is estimated to be in the range of $25 million-$35 million annually, beginning in the first full fiscal year after closing the transaction. McDATA anticipates the combined entity will achieve McDATA's stated standalone non-GAAP operating margin target of 10% by fiscal fourth quarter 2005. One-time cash costs associated with the transaction are expected to be in the range of $40 million-$50 million. To assist in the transition, an integration office has been established with the task of planning for a combined product and services roadmap to best support McDATA's Global Enterprise Data Center initiative and meet customer and partner needs.

Realization of the expected synergies between the two companies in fiscal 2005 is expected to result in an increase to McDATA's annual per share earnings on a non-GAAP basis. This excludes the net effects of any one-time charges related to this transaction as well as the net effect of amortization for intangible assets, amortization of deferred compensation and tax valuation allowances. These expenses, which will increase as a result of the transaction, will be included in McDATA's per share earnings on a GAAP basis.

Both McDATA and CNT are individually distinguished by excellent technical capabilities and strong OEM and customer relationships. Current customers and partners of McDATA and CNT include Dell, EMC, Hewlett-Packard, Hitachi Data Systems, IBM, StorageTek and Sun Microsystems, as well as several additional distributors and resellers.

By acquiring CNT, McDATA expands its growth and profitability potential through solutions, increased efficiency, a broader range of technologies, products and services and expanded sales opportunities, especially in Europe. The combination also should deliver greater value to customers, OEMs and partners by offering complete networking capability solutions across the Storage Area Network (SAN), Metro Area Network (MAN) and Wide Area Network (WAN). With CNT, McDATA will continue to build on its generational data center knowledge in ultra-high availability director class products, channel extension services and secure data movement over distance.

Author:  

Email:    

Topic:    

Content: