Ikanos to Buy Centillium’s DSL Unit

Ikanos Communications Inc. announced plans Tuesday to purchase the DSL technology and assets of Centillium Communications Inc. for $12 million in cash – its third deal in less than two years to add broadband brawn to its burgeoning chip business.

Ikanos aims to get at, and accelerate the introduction of Centillium technology used for VDSL2 platforms. The company also gets its current DSL product line, intellectual properties (60 patents and applications), some engineers and several new customers.

While much focus of late has been on the use of FTTH for the delivery of video-driven, triple-play bundles to residences, as Verizon has practiced, carriers like AT&T make widespread use of DSL-based copper as the last reach to the home.

“Ikanos got a real bargain with this deal,” said Jeff Heynen, directing analyst for IPTV and next-generation OSS/BSS at Infonetics Research. “I find it interesting that of the three product lines Centillium had, it chose to sell off the DSL [assets].”

Ikanos has found asset purchases as a solid means to achieve growth and market presence, having bought the DSL parts of ADI Analog in February 2006 and six months later the QAM modulation technology of Doradus. Similar deals may be in the offing.

“We’re keeping an eye open to new things to augment our operations or help us address new needs,” said Piyush Sevalia, vice-president of marketing for Ikanos. The company has focused largely on residential gateways and chips to support triple-play services, he added, but would not say specifically what products would result from this latest asset buy or when they would become available. He would not identify the new customers Ikanos will get from Centillium.

The Ikanos deal “is interesting in that it expands Ikanos from being viewed as a pure VDSL play to one that has a wider breadth of product. It also broadens the company's geographic reach, which was highly concentrated in Asia,” said Vince Vittore, senior analyst at the Yankee Group. “If you're looking to get on the lower end of the hockey stick curve for any DSL product, you have to focus on both Europe and Asia."{vpipagebreak}

The deal leaves Centillium with integrated circuits and related software for FTTP central office and CPE and VoIP packages for carrier and enterprise gateways and consumer telephony.

"The sale of our DSL business will allow us to focus our resources on Optical and VoIP, our two key growth businesses," said Faraj Aalaei, co-founder and CEO. "We believe that with this targeted focus, we will better serve our customers, reduce our operating loss and improve our prospects.”

Ikanos expects to complete the transaction, subject to the satisfaction of certain conditions, by the end of next month.

Centillium Communications Inc. www.centillium.com
Ikanos Communications Inc. www.ikanos.com

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