Sync Research to Merge With Osicom Unit
Sync Research Inc., a struggling maker of computer networking gear in Irvine, has agreed to merge with a subsidiary of Santa Monica optical networking firm Osicom Technologies, the companies said Tuesday.
Osicom and Sync shareholders will each own 50% of the combined company, to be called Entrada Networks. A spokesman for Sync said the new operation will be based in Irvine, and that no layoffs are planned. There was no word on when the deal will close.
The Osicom subsidiary, Network Access, makes high-speed access devices for local and wide-area networks. The unit, based in Annapolis Junction, Md., expects to report more than $4 million in revenue for its current fiscal quarter and has 120 of Osicom’s more than 300 U.S. employees. Osicom lost $21.7 million on revenue of $68.4 million in its 2000 fiscal year, which ended Jan. 31.
Sync, which makes computer networking devices, has never made an annual profit since it went public in 1995. The company recently reported a 1999 net loss of $4.3 million on revenue of $18.2 million. It has 95 employees, including about 60 in Irvine.
The two businesses have “complementary product lines, technical capabilities and sales channels,” said William Guerry, Sync’s chief executive.
The combined company will be in a stronger position to compete in new markets, such as storage area networking, Guerry said.
But investors were less enthusiastic, sending shares of both companies down Tuesday in Nasdaq trading. Sync shares fell 31 cents to close at $2.81, while Osicom shares dropped $4.50 to $46.75, a loss of nearly nearly 9%. Osicom shares, which reached a high of $149.75 on March 6, have lost more than half their value this month.
Joe Gladue, an analyst with Chapman Co. in Baltimore, attributed some of Osicom’s decline to concerns that falling prices for telecommunications stocks will delay a planned spinoff of its Sorrento Networks fiber-optic equipment unit.
Sync made a dazzling debut on Wall Street in 1995, when its shares more than doubled on the first day of trading. Within a month, the stock climbed to $276.25 when adjusted for stock splits, but then began to drop.
Initially, Sync drew praise for its line of devices that helped companies get more mileage from aging computer networks. But the company faced increased competition and was plagued by deals that were slow to develop.
Analysts said Sync underestimated the resistance of people who use older mainframe computers to make wholesale changes to complex information networks.
The company has trimmed staff and undergone top-level executive changes as it attempted to right itself.
Osicom has a history of controversy. In 1998, The Times reported that its chief executive, Par Chadha, had bought 350,000 Osicom shares without mentioning that the shares were purchased from a large investor who wanted to sell.
Earlier, BusinessWeek reported that Osicom’s shares may have been manipulated by firms associated with organized crime without the company’s knowledge. And Barron’s alleged that Chadha was the subject of a criminal investigation in the U.S. and Britain for certain financial dealings. Osicom and Chadha disputed both of the claims.
Bloomberg News was used in compiling this report.
