Azalea Networks, a wireless mesh provider specializing in video surveillance applications was acquired by Aruba Networks, a broad provider of wireless/Wifi solutions for corporations.
The maximum price to be paid for Azalea is approximately $40 Million. However, $13.5 Million is based on future cash payouts on contingent rights. The initial stock purchase of $27 Million is also subject to a number of adjustments (review the 8K for details on the acquisition terms).
Azalea Networks reports raising $27 Million since its inception in 2005 (see company profile and SEC documents). Its last round publicly announced was $15 Million in Q1 2008.
Aruba Networks, the acquirer has published a FAQ on the acquisition including the following key details on Azalea:
- Claims 25,000 mesh units deployed
- Claims 140 total customers
- $5 Million in 2009 revenue
- About 100 worldwide employees (most in China)
- Most sales are to China and US
- Citing IDC, claims to be largest mesh vendor in China
These data points indicate that Azalea recent growth was modest at best and that they had significantly reduced headcount, likely as their 2008 funding was burned. At $5 Million in 2009 revenue and 100 employees (even factoring in lower Chinese salaries), they likely had a significant burn rate.
The acquisition puts Azalea's valuation at 5x to 8x 2009 revenues which is similar to Aruba's own valuation
(2009 sales of approximately $200 Million
, company valuation of approximately $1 Billion). For a video surveillance focused manufacturer, this is a fairly solid valuation.
However, from the perspective of the investors, this is a fairly flat deal (total invested - $27 Million, acquisition price - $27 to $40 Million).
We suspect most of these mesh video surveillance companies have under $10 Million in annual revenue as well and will need to find general IT manufacturers to acquire them at valuations necessary to justify their investment.
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