Thursday, February 14, 2008

Arbor puts the cap on Ellacoya buy

Arbor Networks Inc., a maker of network security products for service providers, has completed its acquisition of New Hampshire's Ellacoya Networks Inc., officials said.

The "new Arbor" will focus on security and service control products for carriers, and include Ellacoya's deep packet inspection technologies in those platforms.

The deal is also expected to create a company with combined revenue of $70 million in 2007 and an expectation of $100 million in 2008, according to officials of the network security company. Financial terms of the deal were not disclosed.

As previously reported in Mass High Tech, Lexington-based Arbor plans to keep Ellacoya's Merrimack, N.H., headquarters and facility up and running. Some related layoffs are expected, but most of the Ellacoya team is expected to remain with the company, yielding a worldwide employee base of approximately 280 people.

Combined, the two companies have raised more than $167 million in private funding ($145 million for Ellacoya, $22 million for Arbor). As a result of the deal, all previous investors have elected to stay with the new entity, including Waltham-based Atlas Venture, Cambridge-based Flagship Ventures, Connecticut-based Canaan Partners and Boston-based Battery Ventures.

Founded in 1999, Ellacoya was one of a family of companies to spring up after the breakup of Rochester, N.H.-based Cabletron Systems Inc. In 2003, following a series of staff cuts that reduced employee head count by 70 percent, the privately held company recapitalized and refocused on the broadband market.