It’s been more than a year since Glenayre Technologies Inc. first announced its intention to divest the Western Multiplex microwave business unit, yet the company continues to search for a buyer.
Glenayre officially put the microwave business on the block in September 1997, the same time it announced its acquisition of Wireless Access Inc. and Open Development Corp. At the time, Gary Smith, Glenayre president and chief executive officer, said the move was designed to give Glenayre a clearer focus on paging.
“We feel the divestiture will allow both Glenayre and the microwave group to better focus on their respective core markets,” he said. “We want to concentrate our resources on our two primary growth engines-paging and enhanced services platforms for telecommunications providers.”
The company hired Donaldson Lufkin & Jenrette Securities Corp. to secure bids for the business. While Glenayre several times said it was close to signing a deal, no official announcement has been made.
According to Mark Smalley, Glenayre vice president of investor relations, the company still believes selling off the unit is in the best interest of both Glenayre and Western Multiplex, but several internal and external factors have hindered the process.
“The unit had problems getting new products to market,” he said. “Sales fell from $8 million to $6 million.” Smalley was unsure of the exact nature of the problems. The lower sales figures made the business unit somewhat less attractive and therefore more difficult to sell.
A bigger obstacle to the sale of the business may be that potential buyers for the unit are experiencing problems of their own. Microwave company P-Com Inc. had expressed interest in buying the Multiplex unit early on, but the company’s stock value fell from around $25 when it first began looking at acquiring the unit to around $4 today. The company now is facing a class-action fraud lawsuit by shareholders alleging the company provided false information to maintain high share prices.
Despite these setbacks, Smalley expressed confidence a sale is still possible. First, he said the Multiplex unit has solved its internal problems and delivered three new microwave products last quarter. Sales have rebounded, and the unit is reporting a record $9 million of products shipped.
Additionally, he said the stocks of potential buyers have begun to increase, although they remain nowhere near the levels of a year ago.
Smalley said the unit continues to generate interest from potential buyers, but he was unsure if any official talks were underway at this time. No potential buyers have been ruled out, he said.
Smith has placed a $40 million to $70 million price tag on Western Multiplex, and has shown no sign of backing down. Glenayre believes the Multiplex unit is a valuable one and has no intention of selling it off for less than what it’s worth just to get the process over with quickly, Smalley said.
“It’s a profitable unit,” he said. “We’re not going to give it away. If our interest was to just give it away, we could have done so by now.”
