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Xircom buys VoiceStream unit, inks deals

Xircom Inc. (Nasdaq: XIRC) said Wednesday it followed up its purchase of Omnipoint Technologies with alliances with Ericsson (Nasdaq: ERICY) and Cisco (Nasdaq: CSCO).

The spate of strategic partnerships and acquisitions are part of Xircom's strategy to improve its offerings in the wireless technology market.

After Tuesday's closing bell, Xircom said it would buy Omnipoint Technologies, Inc. (OTI), a wholly owned subsidiary of VoiceStream Wireless Corporation (Nasdaq: VSTR) for about $52.2 million in stock.

Shares in the communications equipment maker were up 2 3/4 to 48 3/4. The stock has tumbled since Xircom beat lowered estimates in its second quarter.

Xircom also announced that its board of directors has authorized the repurchase of up to 1.5 million shares of its common stock, contingent upon the closing of its acquisition of Omnipoint Technologies.

The stock repurchase plan is intended to offset dilution caused by the issuance of shares and assumption of employee stock options by Xircom. The stock repurchases will be made over the next several months.

The acquisition of Omnipoint and an alliance with VoiceStream will add Global System for Mobile Communications (GSM), and General Packet Radio Service (GPRS) products to Xircom's Wide Area Network (WAN) wireless offerings.

Under the terms of that deal, VoiceStream will become a minority investor in Xircom by holding 1,201,079 shares of its common stock to be exchanged for all outstanding shares of OTI. Based on Xircom's June 12 closing price, the exchanged would have a value of $52.2 million. Xircom will also assume certain liabilities, and unvested employee stock options worth about $8.3 million.

The deal, expected to close within three weeks, will incur a charge of between $15 and $25 million to earnings during the quarter ended June 30. Xircom said the acquisition will add to earnings in the second year of operations.

  • Xircom's agreement with Ericsson will make it the primary provider of Bluetooth data access products to Ericsson Mobile Communications AB. Bluetooth is a high-capacity, short-wave radio link that allows electronic devices to hook up remotely.

  • Its partnership with Cisco will add wireless Local Area Network (LAN) products to its offerings. The agreement entails joint marketing and development of LAN (WLAN) network adapters based on the IEEE 802.11b Wireless Ethernet standard. Wireless LAN access allows users with laptops and handheld devices to move freely while maintaining uninterrupted connection Financial details of the Ericsson and Cisco deals weren't disclosed.

    There may be more deals for Xirom on the horizon; to ensure Xircom is prominently positioned in the wireless marketplace, the company will "continue to form partnerships and alliances with wireless technology leaders,'' said Dirk Gates, Xircom chairman, president and CEO in a company release.