Germain Lamonde and Philippe Morin are quietly disrupting the market for service assurance in a segment known as the network test and monitoring market. EXFO is not going the route of Netscout which completed a USD 2.3 Billion mega acquisition of Danaher Communications Business in 2015. Netscout is still getting thru the integration process which admittedly takes time given the size and diversity of business units in the Danaher companies. Remember Danaher acquired many businesses including Tektronix, Fluke, and Arbor Networks and did little to integrate them before it was sold off to Netscout. Instead EXFO is selectively picking up smaller undervalued assets in its core market that complement its core business. R&D teams can integrate the newly acquired asset faster and eliminate overlapping capabilities which helps customers reduce the fatigue associated with swivel chair management. EXFO is expanding its total addressable market and acquiring high quality customers allowing it to cross-sell active, passive, and advanced analytics solutions across the entire customer base.

EXFO completed its acquisition of French based Astellia which was announced last week at MWC2018 in Barcelona. Appledore Research estimates it will add another USD 45 Million in topline revenue in 2018 and give EXFO greater access to CSPs in the Europe Middle East Africa region. Orange France is a long-time customer of Astellia and its largest customer by revenue. Astellia has an established footprint in many of Orange Operating companies in Europe, Middle East and Africa. Other key customers include 3, Telefonica, Bouygues Telecom, Altice and Zain. The combined assets now give EXFO a leading position in the mobile active and passive test, monitoring, and subscriber analytics market.

Astellia top line revenue has been in decline since 2016 (figure 1). Our intelligence indicates the company has been seeking strategic options since 2014. EXFO disclosed that the deal was valued at EUR 25.9 Million which is 0.67 price to sales of 2017. We view this as a good deal for EXFO and Astellia. EXFO acquires complementary products to its core business and an outstanding customer base in EMEA. Key business deployment metrics of the combined company include:

  • More than 250 monitoring systems in operation
    • 120 Nova passive probe systems deployed by Astellia
    • 80 active solutions deployed by EXFO
    • More than 50 NQMS fiber monitoring solutions deployed
    • 15 Ontology deployments focused on rich topology multi-layer graphs
  • Unique combination of active testing and passive monitoring capabilities solving complex challenges in closed loop automation in the NFV/SDN domain
  • Selected by 3UK as the primary supplier (Astellia) in the pre-test, validation, and assurance of VNFs deployed in its network

EXFO management has proven its ability to integrate acquired companies in the testing and assurance market to create value for customers and its shareholders. We think EXFO will bring its core products and the newly acquired Ontology and Astellia products to address the future automation tools required in network operation centers.

Figure 1: Revenue 2015 – 2017 by company:

Appledore reports on Exfo are available here.



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