From Venture to Global Player
Dasan Networks announced on April 12 that it merged with Zhone Technologies, a Nasdaq company. The merger between the IT firm representative of South Korea and the world’s eighth-largest telecommunications equipment supplier is to lead to the creation of DASAN Zhone Solutions, the fifth-largest telecommunications equipment company in the world.
Established in 1999, Zhone Technologies is headquartered in California and has manufacturing facilities in Florida. It is currently providing its network solutions for more than 750 service providers and enterprises worldwide. The company went public in 2003 and recorded approximately 120 billion won in sales revenue in 2015.
Dasan Networks, in the meantime, has led the domestic development and commercial utilization of Internet equipment all the way since 1998. It has accelerated the popularization of broadband Internet services in South Korea while replacing imported equipment with ones it developed on its own. At present, more than half of Internet services provided by KT, SK Broadband and LG U+ are via the equipment of Dasan Networks.
The merger process is scheduled to be completed by July. Then, Dasan Networks becomes the parent company while Zhone Technologies becomes its subsidiary after being renamed to Dasan Zhone Solutions. In addition, Dasan Network Solutions U.S. becomes a subsidiary of Dasan Zhone Solutions via share exchange involving no cash transfer at all. The following is a recent interview with Dasan Networks CEO Nam Min-woo.
What is the background of the merger between Dasan Networks and Zhone Technologies with the latter being on a roll as a NASDAQ company in the United States?
Zhone Technologies has enjoyed a high level of brand awareness and its business has been successful so far in the North American market. Outside North America, however, it recently posted an annual loss of more than two billion won in the presence of Chinese firms and fierce competition in the market. The merger is to deal with this situation by global competitiveness enhancement.
After the merger, Dasan Networks is to have 58% of the new firm’s stake. Then, what will be Zhone Technologies CEO Jim Norrod’s role?
The CEOs of both companies will be in charge of the new corporation together with each other and I am currently discussing details with him. For the time being, we will concentrate on R&D, marketing, purchase, production, logistics and the like while making no significant changes so that the business combination can result in positive effects as soon as possible.
Some believe that Dasan Networks could have become a greater company if it had not gone through the financial crisis in 1997. What do you say?
Well, I don’t think so. I had founded Korea Ready System, a software importer and seller, in 1993 and the company had fared well for years before the crisis in 1997. During the crisis, I had to make a remittance to the Silicon Valley but the rapid exchange rate increase at that time made it almost impossible. Then, I flew to the Silicon Valley with my engineers and asked for due date extension to make a breakthrough. At that time, I came to see Internet firms such as Cisco and e-Bay and predicted that the Internet era would come to my country as well. Dasan Networks was founded in the following year and went public on KOSDAQ two years later.
The company faced another crisis in 2004 but succeeded in overcoming it by means of R&D investment from Siemens worth a total of 60 billion won or so. Dasan Networks and Siemens signed agreements for joint product development, supply and marketing as well and were engaged in joint sales activities across the world for three years. The brand power and marketing networks of Siemens and Dasan Networks’ technological strength were mixed well with each other while the South Korean market recovered to allow my company to break the 100 billion won mark in sales and 10 billion won mark in profits in 2005.
In short, the financial crisis in 1997 and that of 2004 have allowed Dasan Networks to make a leap forward in R&D and experience the global market.
Are you planning on any change in U.S. market strategy from July this year?
After the completion of the merger process, Dasan Networks and Dasan Zhone Solutions will work with each other in all the fields including development, marketing, purchase, production and distribution. The latter’s main products consist of broadband access equipment, mobile backhaul solutions, software defined networking solutions and enterprise switch equipment.
You are also heading the Korea Entrepreneurship Foundation. Please introduce our readers to the foundation and your role in it.
The foundation’s top priority is to imbue young people with entrepreneurship. To this end, the foundation has brought in the Fast Track program of Kauffman Foundation while launching its own programs for startup promotion and entrepreneurship training targeting students and the general in public. In addition, it has taken part in the Ministry of Science, ICT & Future Planning’s Startup Mentoring Center so as to help startups and future startups thrive in their business.