Fitting: A 'great' fit

Although many people in the industry were aware of the financial problems at Tiernan Communications, no one knew how bad things were until Raydyne ComStream CEO Bob Fitting got a phone call on April 2.

Tiernan had effectively run out of venture-capital money and had been trying to close a deal to be acquired by an Israeli company for months, but it never happened. Disheartened, company executives were preparing to inform employees that Tiernan would shut its doors on Friday the 13th, when a staff member made the call to Fitting.

Raydyne ComStream is a manufacturer and marketer of satellite Internet-infrastructure transmission equipment, such as broadband modems, multicasting receivers, converters and modulators and other ancillary products for digital TV, data and telephone service.

Raydyne ComStream's products easily connect to Tiernan encoder equipment. In fact, many customers have been pairing the two technologies for several years.

"We currently share a lot of the same customers," says Fitting. "This is really a synergistic fit."

So a deal for Raydyne to purchase the assets and product lines of Tiernan for $3.9 million was quickly worked out.

With nearly $16 million dollars in the bank before the Tiernan deal, Fitting says he is always looking for new deals—his company acquired a system integrator called Armer Communications for $3 million in cash and stock in December—and this deal was just too good to pass up.

"We did this whole deal in less than 10 days," Fitting points out.

Tiernan, he continues, had "an appetite bigger than their pocketbook, and they essentially ran out of money. I got the phone call, and I was very interested. I saw a great fit for us."

Fitting asked for Tiernan financial materials on Friday, April 6. On Monday the 9th, Raydyne made its first visit to Tiernan's manufacturing facilities in San Diego. The deal to acquire Tiernan's assets was closed on Thursday, April 12.

The only overlap expected is in the area of satellite modems, in which case, Fitting says, Tiernan's product line will be discontinued. "The purchase of the Tiernan assets, including product lines, will provide Raydyne ComStream with additional products to support our continued growth in the digital- video and Internet-over- satellite marketplace," he points out.

Under terms of the agreement, Raydyne ComStream inherits the Tiernan assets and its name, which will remain on all existing products. But Raydyne has established an offshoot company called Tiernan Raydyne ComStream to operate the new venture.

All Tiernan products will be marketed through the Raydyne ComStream worldwide sales organization.

No new management team has yet been appointed, but Steve Bonica, Tiernan's president, will not be with the new company. Some other layoffs are expected, but the deal is too new for further specifics to have been addressed.

Raydyne ComStream maintains manufacturing facilities in Phoenix, San Diego and Boca Raton, Fla., as well as overseas. Both Raydyne ComStream and Tiernan will exhibit their products at NAB, although Tiernan will exhibit in a smaller booth than originally planned.