Tennyson to lose SOX in broadband gamble

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Telecommunications vendor Tennyson Networks has signaled a major change in direction, seeking buyers for its core Smart Office eXchange platform (SOX) operations and concluding its purchase of Ericsson New Zealand's data services division.

The initial purchase consideration for the Ericsson division was $1.4 million, plus payments to Ericsson based on a percentage of sales from the data services business for this calendar year.

Meanwhile, Tennyson has also entered discussions with “a number of parties” interested in acquiring the operations and intellectual property of its existing SOX business.

“This [Ericsson acquisition] is a low risk and highly exciting opportunity because the overall purchase price is linked to success. The [data services] business is performing strongly to date,” said Tennyson chairman Harvey Parker.

It has been reported that the Ericsson acquisition will make Tennyson worth $30 million in annual revenue, and give the listed Aussie company rights to own and distribute Ericsson NZ products worldwide.

The division earned Ericsson $100 million in three years, with its broadband products allowing high-speed Internet access over existing copper lines, a solid distribution chain and one blue chip customer, Polish national telco TP SA.

Tennyson believes there is potential to penetrate markets across Europe and Asia as broadband usage ramps up. The Data Services division has developed technology which includes Ericsson-branded Synchronous High-speed DSL and ADSL products. Tennyson also gains a patent for IDSL technology.

Parker believes the new direction could lift profitability. “The rapid uptake of high speed broadband Internet services is transforming communications for businesses and consumers around the world,” he said.

Over the past 18 months Tennyson has been restructured, appointing a new chairman and independent directors. The company is believed to be seeking further acquisitions. Tennyson Networks (ASX: TNY) closed at five cents a share on Thursday.

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