Proxim, Netopia call off merger

Wireless home-networking company Proxim and DSL-gear maker Netopia scotch their merger; Intel's abandonment of Proxim's wireless standard may be the reason.

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Wireless home-networking company Proxim and DSL-gear maker Netopia called off their merger Friday, two months after it was announced.

Citing market conditions, the companies said in a press release they would cease plans for Proxim to purchase Netopia, without payment of any termination fees.

Analysts believe the deal became tainted following news from Intel earlier this week that the chipmaking giant would stop supporting HomeRF wireless technology--the wireless standard supported by Proxim.

Instead, Intel said its new wireless-product line for homes would support Wi-Fi, or 802.11B, a wireless standard backed by Cisco Systems, 3Com and others. Both standards allow people to connect their computers wirelessly to the Internet in homes or small offices.

When Proxim first announced plans to purchase Netopia, the deal was valued at about $225 million in stock. Shares of Proxim have fallen about 70 percent since then, much of that loss following Intel's news.

"It dropped their market value pretty seriously. It would value the deal at about $60 million," said Gene Holmstead, an analyst with H.C. Wainwright. "I guess Netopia shareholders perhaps felt they weren't getting enough of a premium on their shares."

Still, Sunnyvale, Calif.-based Proxim and Alameda, Calif.-based Netopia have pledged to continue working together, and remain optimistic about the future of HomeRF technology. Netopia plans to integrate Proxim's HomeRF technology into its broadband routers and integrated access devices, the company said in a statement.

"It's not going to stop the product plans or the way the companies are working together," said Holmstead. "(Calling off the merger) was justifiable given the sharp drop in Proxim's share price, but if the market were to firm up perhaps they would start talking again."