ADC Telecom CEO Comments on the Failed Andrew Merger

On August 9th, ADC Telecom (ADCT) and Andrew Corp (ANDW) announced that they were calling off the merger announced on May 31st. In ADC's conference call with analysts yesterday, CEO Robert Switz (photo on right) gives his view on upcoming M&A opportunities:

Vivek Arya, Merrill Lynch

Now that Andrew is not an option, Bob, how do you think about the long-term strategy for the company. Because in the past you had said that increasing scale is the strategy for the company and that was the reason to go after Andrew, and now that that is not an option, how do you think about potential M&A opportunities?

Robert Switz, Chief Executive Officer and President

I think Andrew is only one of many options, and there other ways to increase scale. We’ve shared with you over many years the fact that we’ve been very active, studying opportunities outside the company to scale and capability to the company. So, I think people shouldn’t look at Andrew as the end of the strategy. Andrew was one part and I would argue, I’ll make my final point on Andrew here on this call, it could have been an outstanding opportunity for ADC. I think there were a lot of things that were misunderstood about that, which is unfortunate. It met an awful lot of criteria and it would have served us well in the long term. So, unfortunately that didn’t come to pass, but it’s one of many opportunities to gain scale, broaden portfolio, and support the company’s core strategy. Within our strategy of being the infrastructure leader, there are many paths to get there organically and inorganically. That was the one that was on the table and we said over time that if an opportunity came along that was sizable in nature, made sense, fit our strategy that we would take advantage of that opportunity, and Andrew was a very, very unique opportunity to do that. We tried to execute it, but there are a lot of other things for us to do. We are still committed to gaining scale. The industry continues to speak to that. You’re going to see a continuation of vendors consolidating to support larger customers. So, from a text book standpoint, the strategy is well supported and there are plenty of opportunities. We want to be careful as we have been and make sure that we focus on the right opportunities. But, you don’t have to win every battle to win a war and we’re focused on the war and there are plenty of other opportunities for us.

Our acquisition strategy is both wireline and wireless. We certainly like to add some scale to the wireless piece of our business. Certainly Andrew would have done more than that, but to the extent that companies fit our strategic ambition they can be wireless or wireline like with FONS for instance, which essentially is a wireline acquisition but fell at the heart of our fiber strategy and our desire to move closer to the edge in fiber and participate in the D-fiber initiatives more closely. KRONE was a wireline acquisition but it got us enterprise capability and got us a career product compatible with European standards as well as global participation. So, we’re not relegated just to wireless. We certainly like to expand our capability to more broadly include wireless participation, but it can be in either of those domains.