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Procera Networks (NASDAQ:PKT)
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Procera Networks to Acquire Vineyard Networks
Acquisition broadens addressable market into enterprise through OEM channel
FREMONT, Calif., January 7, 2013— Procera Networks, Inc. (NASDAQ: PKT), the global intelligent policy enforcement company, today announced that it has entered into a definitive agreement to acquire Vineyard Networks Inc., a leader in the Enterprise OEM DPI market. The acquisition will enable Procera to extend its Intelligent Policy Enforcement business into the growing Enterprise DPI market.
Procera believes that network intelligence technology is foundational for networks of the future. James Brear, Procera’s President and CEO, said: “Every network element will require intelligence. Our strategic vision is to enable networks of any size to have the intelligence needed to operate effectively. Procera directly addresses this need for service providers of all types through our PacketLogic solutions. Vineyard enables Procera to expand our total addressable market through their OEM business to include enterprise network equipment vendors, adding the entire enterprise space along with additional opportunities in the service provider OEM market. The addition of Vineyard, which has 34 employees mostly in engineering and product development, establishes Procera as the clear leader in the high-growth DPI market.”
“Procera and Vineyard have natural synergies,” said Jason Richards, Vineyard’s CEO. “Vineyard’s leadership in Enterprise DPI combined with Procera’s industry-leading suite of PacketLogic products provides customers and partners with a single solution for Intelligence, Analytics and Enforcement.”
The growing use of Software Defined Networking, cloud services and storage, as well as the “Bring Your Own Device” (BYOD) trend for consumer and enterprise, has blurred the line between enterprise and service provider networks. Consumer, enterprise and service provider network operators are searching for solutions that provide better visibility and control in an ever-changing landscape of applications, content owners and content-delivery networks. Existing network solutions that do not have sophisticated network intelligence cannot effectively meet the Quality of Experience expectations of broadband subscribers. “Powered by Procera” solutions will deliver superior visibility and enable a variety of use cases. Procera believes that its combination with Vineyard will create a new force in the DPI market for Service Providers and Enterprises. The total addressable market (TAM) for the Enterprise OEM DPI market is expected to be over $300 million in 2013.
The total consideration for the acquisition is $28.0 million CAD, comprised of $15.4 million CAD in Procera common stock and $12.6 million CAD in cash. The acquisition is subject to the satisfaction of certain closing conditions, and is expected to close on or before January 15, 2013.
Subject to closing, Procera expects to realize meaningful bookings, revenue and operating scale from the acquisition. On a non-GAAP basis, excluding stock-based compensation expenses and amortization of acquired intangible assets, management currently expects the following:
- Vineyard is expected to add approximately $4 million to $5 million to Procera’s 2013 revenue, with gross margin in excess of 90%.
- Including one-time, non-cash purchase accounting adjustments, the acquisition is expected to be slightly dilutive to Procera’s 2013 EPS; without these adjustments the acquisition would have been expected to be EPS neutral in 2013.
- The acquisition is expected to be accretive to Procera’s 2014 EPS on a non-GAAP basis.
Procera has not provided a reconciliation of forward-looking non-GAAP financial measures to the directly comparable GAAP measures because, due primarily to variability and difficulty in making accurate forecasts and projections, not all of the information necessary for a quantitative reconciliation is available to the company without unreasonable efforts.
On a GAAP basis, Procera expects to record significant quarterly operating charges for the amortization of intangible assets and compensation following the allocation of the purchase price.