Dowty Group Plc held a meeting yesterday to quash references to its $49m acquisition of privately-held Cherry Hill, New Jersey-based data communications company Datatel looking similar to Case Communications’ acquisition of Rixon. The company also made clear that the next acquisition on its list would be a local area networking company. In Datatel, we are buying a company that is smaller than us. Case’s acquistion of Rixon looked more like the tail wagging the dog, says managing director of Dowty Information Technology Bruce Brain. Datatel is a clean company with excellent management and no financial jiggery pokery. Its sales and profits have grown 99% and 260% per year respectively between 1982 and 1986 and was going for a rights issue this year or be acquired. It is strong on research and development and there is also no overlap of products with Dowty. Dowty bought Datatel for its digital T-1 multiplexing products, which has a US market worth around $400m at the moment and expected to grow to $600m by 1989. The prize was not its less substantial limited distance 56Kbps and 64Kbps modem business, although these products are complementary to Dowty’s switched and high speed systems. The modem market will never recover, says Brain. But he does pay respect to the fact that the main vehicle for the division’s growth in the past three years has been its UKP1.2m acquisition of modem-company Steebeck. Dowty will be bringing a V32 9,600bps full duplex dial up modem to the European market in the near future to retain its position in modems. It claims to be in fifth place. Meanwhile, Datatel is preparing to hit the US market with Dowty modems. In addition the UK company will be launching a Megastream modem, based on the Datatel 2.048Mbps. By 1990, the company expects to making around 60% of its sales in data communications equipment in the US, with the other 40% coming from Europe. Datatel also has a strong research and development arm, and is in process of developing a T-3 multiplexer – equivalent to 28 T-1 channels. Dowty In-formation Systems forecasts sales of UKP70m for 1987-88 up from UKP50m last year, on which it did UKP5.3m.
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