Provides time for node scale vectoring, G.fast. I'm very glad I don't have to write an obituary for Ikanos, home of a large team of respected engineers. $22M from Dado Banatao's Tallwood will keep Ikanos afloat, but it's the $15M Alcatel is putting in that points to a bright future.
Alcatel remains the largest DSL vendor and has long bought from Ikanos, but many of their DSL chips have been coming from Broadcom. With 40M lines of vectored DSL on order in Europe and Australia, Alcatel wanted to make sure they had several suppliers. Ikanos has been developing a vectoring chip aimed at AT&T and other telcos that want to vector 192 ports in large cabinets.
Last year, I killed a story about Ikanos although I was confident it was accurate. Unfortunately, the chips they needed were taking longer than hoped. I listened to the CEO on the conference call and ran the numbers. I was convinced they were soon about to run out of money. There was a registration for a new financing but it wasn't clear whether anyone would put the money up.
I don't overestimate my influence but realized that if I published the article it might be the final straw for the company. I decided I didn't want to be responsible for putting 100 hardworking people out of work in a company that had earned my respect. This is not standard journalism practice but as owner I make my own choices.
This was one of four articles I killed over 15 years despite being confident they were solid stories. Two were similar, decent companies in trouble I didn't want to push over the edge after the 1999 boom. The other was about the largest telco in America. Two CEOs complained to me that the telco had pressured them to take actions that were definitely against FCC rules and probably illegal. They had little choice; that telco was their largest customer. I realized I could be sued for libel if I printed the story and put under enormous pressure to reveal my sources. Jail was unlikely but not impossible. If I printed, I would have to be ready to risk jail. I decided I wouldn't do it. nbsp; Instead, I privately told an FCC Commissioner. He decided that the FCC probably wouldn't prosecute and let the issue die.
Ikanos Communications Announces Financing Plan
Tallwood Venture Capital and Alcatel-Lucent Lead the Financing with a Private Placement and Tallwood Commitment for Future Equity Infusion
Ikanos and Alcatel-Lucent to Collaborate on New Products
Ikanos Plans Rights Offering for All Existing Stockholders
FREMONT, Calif., Sept. 29, 2014 — Ikanos Communications, Inc. (NASDAQ:), a provider of advanced broadband semiconductor and software products for the connected home, today announced that the company’s largest investor, Tallwood Venture Capital (Tallwood), and Alcatel-Lucent (Euronext Paris and NYSE: ALU) are purchasing $11.25 million and $5.0 million, or approximately 27.4 million and 12.2 million shares, of the company’s common stock, respectively, at $0.41 per share for aggregate gross proceeds of $16.25 million, and Alcatel-Lucent has committed to loan the company up to $10.0 million, subject to the terms of the loan agreement. In addition, Tallwood has agreed to purchase an additional $11.25 million of common stock at the same per share price (the Standby Agreement). Alcatel-Lucent has entered into a collaboration with Ikanos on the development of ultra-broadband products.
In order to offer the company’s other stockholders the same ability as Tallwood to purchase shares of the company’s common stock at the same price, the company has determined to register a public offering (the Rights Offering) of approximately 144.9 million shares of common stock. Pursuant to the Rights Offering, each stockholder of record on September 26, 2014 will be entitled to purchase shares of common stock and, if a stockholder purchases its pro rata share of the Rights Offering (the Base Offering) and all shares subject to the Rights Offering are not purchased by other stockholders, the stockholder will have an over-allotment option. Tallwood has indicated its intention to purchase, between its initial purchase of $11.25 million in the private placement, and the Base Offering, an aggregate of $22.5 million of common stock and will be deemed to be eligible to participate in the over-allotment option. Subject to the over-allotment option available to all stockholders, including Tallwood, and to Alcatel-Lucent’s purchase of $5.0 million of common stock in the private placement, any stockholder purchasing its pro rata share in the Base Offering will not be diluted by virtue of Tallwood’s purchase of common stock. To make the Rights Offering possible, the company will seek stockholder approval to authorize 225 million additional shares of common stock.
In connection with its commitment to purchase additional shares of common stock, Tallwood has entered into a stockholders’ agreement which provides that its common stock in excess of 37.5 percent of the outstanding stock will be voted proportionately with the votes of stockholders other than Tallwood, except with respect to the proposal to authorize 225 million additional shares of common stock, for which Tallwood has agreed to vote all of its shares in favor.
The company also announced its intention to grant equity awards to its employees and executive officers shortly after completion of the Rights Offering to maintain their percentage ownership of the company at a level generally commensurate with their ownership percentage immediately prior to the private placement.
“As a world leader in ultra-broadband, we place a great deal of value in technology and innovation,” said Federico Guillen, president Fixed Networks Division at Alcatel-Lucent. “We set a very high standard when it comes to selecting our partners. The collaboration with Ikanos is aligned with our vision of bringing ultra-broadband to as many people as possible.”
As a global communications company providing products and innovations in ultra-broadband fixed and wireless access to service providers and their customers, Alcatel-Lucent leads the industry in xDSL broadband access market share and vectoring deployments. According to a Q2 2014 report by The Dell’Oro Group, Alcatel-Lucent holds the top position in VDSL shipments, with 44 percent market share. On a cumulative basis, Alcatel-Lucent has shipped close to 50 million VDSL2 ports, of which 7.6 million are VDSL2 vectoring ports.
“Tallwood remains fully committed to Ikanos as a key company in our portfolio in the broadband access and connected home markets,” said Dado Banatao, managing partner at Tallwood Venture Capital and chairman of the board of directors at Ikanos. “We are delighted to have Alcatel-Lucent as a co-investor in the private placement. The new financing and the addition of Alcatel-Lucent as a strategic investor create a growth opportunity for Ikanos as the market transition to gigabit broadband accelerates.”
“We are very pleased to see the continued commitment from our lead investor, Tallwood, as well as the new investment by Alcatel-Lucent,” said Omid Tahernia, president and CEO at Ikanos. “The private placement and the collaboration with Alcatel-Lucent are all testaments to Ikanos’ vision, strategy, and commitment to innovation. We have worked diligently to provide a financing structure so that all of our stockholders are given the opportunity to maintain their percentage interests in the company. We remain committed to regaining our leadership position in this market, and appreciate the continued support of all our investors.”
Ikanos intends to use the net proceeds from the new financing for working capital and general corporate purposes and for capital expenditures.