DZS Secures $25 Million in Funding and Signs Definitive Agreement to Divest Asia Business
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Insights
The divestiture of DZS's Asia operations to DASAN Networks Inc. represents a strategic refocusing of the company's business model toward regions with higher growth and margin potential. By receiving $5 million in cash and eliminating $43 million of debt through this transaction, DZS is poised to strengthen its balance sheet. The $25 million in new funding, through debt and equity, further bolsters the company's financial position, providing capital for investment in the Americas, EMEA and ANZ regions. Investors should note the potential for improved financial health and the company's ability to capitalize on government stimulus funds aimed at expanding broadband access.
Moreover, the transition to a more software-centric, AI-driven business model aligns with current industry trends towards software-defined networking (SDN) and away from hardware-centric solutions. This shift could lead to higher gross margins and recurring revenue streams, which are often more attractive to investors seeking stability and growth. The divestiture and recapitalization efforts suggest that DZS is addressing its challenges proactively, positioning itself for sustainable long-term growth in its chosen markets.
DZS's strategic pivot to focus on specific high-growth regions is indicative of the broader industry movement towards regional specialization and the leveraging of local market dynamics. The company's investment in its Velocity access edge optical line terminal (OLT) portfolio and AI-driven orchestration software suggests a keen understanding of the evolving needs of service providers, especially in the context of geopolitical security concerns and the shift away from Chinese vendors.
The company's alignment with government stimulus initiatives could be crucial as these funds begin to be deployed, potentially leading to significant contract wins and partnerships. DZS's refined geographic focus and product offerings are likely to resonate with service providers in the Americas, EMEA and ANZ regions, which are increasingly seeking open, standards-based and secure networking solutions. The anticipated increase in demand for high-speed digital communication services, driven by government initiatives, could present substantial market opportunities for DZS.
The divestiture of DZS's Asia business is a strategic move that reflects the company's commitment to Fiber-to-the-X (FTTX) and 5G mobile transport technologies, which are critical for next-generation telecommunications infrastructure. The focus on software-defined solutions, such as the Velocity V6 Access Edge and Saber 4400 Optical Edge, demonstrates an understanding of the industry's shift towards flexible, scalable and efficient network architectures.
As DZS concentrates on software-driven solutions, the company is likely to benefit from the increasing demand for network slicing, automation and orchestration capabilities, which are essential for managing complex 5G networks. The divestiture enables DZS to deploy resources more effectively in regions that are strategically significant and receptive to the company's technology, potentially leading to enhanced market penetration and customer acquisition.
Divestiture to Korea-based DASAN Networks Inc., will allow DZS to focus on high growth, higher margin geographic regions while receiving an additional
DALLAS, Jan. 05, 2024 (GLOBE NEWSWIRE) -- DZS (Nasdaq: DZSI), a global leader of access, optical and AI-driven cloud software solutions, today announced it has secured
On Jan. 5, 2024, DZS signed a definitive agreement to sell its Asia operations to Korea-based DASAN Networks Inc. (DNI), a significant stockholder of DZS, for
In addition, DZS has secured
The divestiture allows DZS to focus on the Americas, EMEA and ANZ regions that are strategically aligned with the technology and acquisition investments made over the past several years, specifically the company’s category-defining Velocity access edge optical line terminal (OLT) portfolio; Saber optical edge reconfigurable optical add-drop multiplexer (ROADM) dense wavelength-division multiplexing (DWDM) platform resulting from its Optelian acquisition in 2021; and its advanced AI-driven orchestration, automation, slicing, network assurance and WiFi management software portfolio resulting from the company’s acquisitions of RIFT and ASSIA software and R&D assets in 2021 and 2022 respectively.
This divestiture of its Asia Business aligns with the company’s vision, strategy and growth pillars unveiled in October of 2020, specifically 1) Fiber-to-the-X (FTTX) broadband investment cycle fueled by over
Over the past two years and during the second half of 2023, DZS has secured several new marquee customers inclusive of multi-year FTTX networking and 5G cloud software contracts which the company anticipates will fuel valuable growth over the next several years. The
“The
Vogt concluded, “Although 2023 was a reset across our industry as service providers worked through post-pandemic supply and inventory challenges, DZS will enter 2024 right-sized, recapitalized and better positioned for long-term sustainable growth focusing on higher margin software-defined solutions and markets. While the past six months have been challenging due to our previously announced restatement process, as well as a global supply chain reset, our leadership team and financial advisors have worked very well together securing
DZS will host a conference call at 8:30 a.m. ET on Monday, January 8, 2024. Please join the conference call at least five minutes prior to the start time to ensure you are admitted prior to management’s prepared remarks. A live broadcast and replay of the audio webcast will be available at https://investor.dzsi.com.
About DZS Inc.
DZS Inc. (Nasdaq: DZSI) is a global leader of access, optical and AI-driven cloud software solutions.
DZS, the DZS logo, and all DZS product names are trademarks of DZS Inc. Other brand and product names are trademarks of their respective holders. Specifications, products, and/or product names are all subject to change.
This press release contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Private Securities Litigation Reform Act of 1995. These statements reflect the beliefs and assumptions of the Company’s management as of the date hereof. Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would,” variations of such words, and similar expressions are intended to identify forward-looking statements. Such statements include, but are not limited to, statements about the consummation and timing of the Asia business divestiture, the anticipated benefits of, and opportunities from, the divestiture, including the impact to the Company’s balance sheet, operations and financial results. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. The Company’s actual results could differ materially and adversely from those expressed in or contemplated by the forward-looking statements. Factors that could cause actual results to differ include, but are not limited to, those risk factors contained in the Company’s SEC filings available at www.sec.gov, including without limitation, the Company’s annual report on Form 10-K, quarterly reports on Form 10-Q and subsequent filings. In addition, additional or unforeseen affects from the COVID-19 pandemic and the global economic climate may give rise to or amplify many of these risks. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date on which they are made. DZS undertakes no obligation to update or revise any forward-looking statements for any reason.
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Investor Inquiries:
Ted Moreau, Vice President, Investor Relations
Email: IR@dzsi.com
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