Native Networks has raised $50 million to date. Israel Seed, Tamir Fishman, and JVP are among the investors.
 
Batya Feldman and Ofer Levi    28 Feb 05   17:11 
 
Communications equipment giant Alcatel (NYSE:ALA; Paris:CGEN) will close its acquisition of Native Networks for $55 million in cash in a few days. The two companies have been negotiating a deal for several months. Technology magazine "Light Reading" broke the story on Friday.
Native Networks' managers and investors declined to comment on the report.

Native Networks develops Metro Ethernet Access equipment and sub-systems that enable communications operators using traditional protocols, such as Europe's SDH and the US's Sonet, to switch to Ethernet protocols. Native Networks is not the only Israeli company in this field; Atrica and Corrigent Systems are also active in it.

Native Networks was founded in 1999 by CSO Gilad Goren and CTO Menahem Kaplan, both former employees of ECI Telecom (Nasdaq: ECIL). Native Networks CEO Rami Hadar joined the company two years ago. Hadar co-founded and was VP marketing and business development at Ensemble Communications, until it closed its development center in Israel in 2001. Prior to founding Ensemble Mr. Hadar co-founded and was CEO of CTP Systems, which was acquired by DSP Communication in 1995.

Native Networks' many investors include Jerusalem Venture Partners, which owns 16% of the company; and Tamir Fishman Venture Capital (TASE: TFVC), which owns 11.6% of the company after a $3.7 million investment. Israel Seed Partners was the first investor in Native Networks, and has participated in all the company's financing rounds.

Native Networks has raised $50 million to date; the exit is not one of the more glorious ones in an Israeli company.

Native Networks and Alcatel began collaborating in 2002, when they signed a cooperation agreement, under which Alcatel sells Native Networks' products. When the agreement was signed, it was expected that Native Networks it would generate tens of millions in sales for the company by 2004. Revenue was smaller than expected, and sources close to the company said that it failed to break even in 2004, with only $5 million in revenue.

Hadar told "Globes" yesterday that the expected tens of millions of dollars in sales did not materialize.

This will be Alcatel's first acquisition in Israel. It has cooperation agreements with other Israeli companies, including Emblaze (LSE: BLZ), BATM Advanced Communications (LSE: BVC), Unipier, Adjungo Networks (which merged with Flash Networks), and Celltick Software Technologies.