Highly Complementary Product Lines Extend Digi's Leadership Position in Commercial Grade Device Networking
Minnetonka, Minnesota, May 26, 2005 — Digi International®
Inc. (Nasdaq: DGII) today announced the acquisition of
Rabbit Semiconductor, Inc., formerly
Z-World®, Inc., a privately held corporation and the manufacturer of
the popular Rabbit® line of microprocessors and microprocessor-based
core modules and Z-World single board computers. The acquisition
is a merger transaction for $49 million of cash.
Based in Davis, California and employing 142 people, Rabbit generated
$27.3 million in revenue and $1.4 million net income in their fiscal
year ended September 30, 2004.
Rabbit’s value proposition is to provide quick-to-market solutions for a
variety of systems and devices that typically require connections to the
Internet. These solutions are used in building security, point of sale,
parking systems, telecommunications, vehicle and ship systems, container
tracking and a broad variety of similar applications. Similar to Digi,
Rabbit bundles hardware and software together, creating an
engineer-friendly development environment. Customers include Lockheed,
Boeing, McDonnell Douglas, IBM, GM, Ford, and NASA, along with thousands
of small- and medium-sized companies.
"The combination of Digi and Rabbit is very exciting because there is
such a tight strategic and cultural fit," said Joe Dunsmore, Chairman,
President and CEO of Digi. "The product lines are complementary and the
product and channel synergies will provide tremendous growth potential
for the future. Conservatively, we believe the acquisition brings an
incremental $100 million of addressable market that we believe will
roughly double in four to five years."
Norm Rogers, Founder and CEO of Z-World, said, "Digi is a perfect match
for us, as we’re in adjacent segments of the same business. We
understand each other and our corporate cultures are compatible. Our
products fit together rather than butting against each other. I am
confident this will be a highly successful combination."
Complementary Product Lines Rabbit products are
primarily applied to endpoint devices and applications such as sensors,
meters, vending machines, card readers, and scales. There are very
stringent power, physical size, and software code size constraints often
associated with these kinds of devices. By contrast, Digi products,
including Digi’s
ConnectCore™ and
Digi Connect ME™ embedded modules and NetSilicon’s
Net + ARM microprocessors, are typically used in integration point devices
such as access control systems, alarm system controllers, HVAC
controllers, industrial drives, as well as more complex endpoint devices
such as kiosks, industrial printers, RFID readers, and security
cameras. Requirements for these devices typically include higher data
speeds, larger and more complex software, and often a graphical user
interface.
"This acquisition represents one plus one equals ten," said Glen
Allmendinger, President of Harbor Research, a consulting and research
firm tracking the device networking and pervasive computing markets.
"Customers in a wide range of industries and applications will benefit
from Digi’s and Rabbit’s complementary skills, products and market
reach. Rabbit provides networking solutions for endpoint devices that
support many simple I/Os and sensors. Digi is the market leader in
providing networking solutions for more sophisticated devices like
industrial controllers and communications gateways. The combination of
these two competencies provides customers a partner who can supply
easy-to-integrate embedded networking solutions for both of these
needs. Combining these leaders in the embedded device networking arena
should lead to significant growth and value creation."
With the Rabbit acquisition, Digi now has the widest range of embedded
device networking solutions in the industry. Device manufacturers can
select from a menu of microprocessors, operating systems,
microprocessor-based modules and single board computers, to best fit
their application, volume, cost, and time to market requirements.
Merger Specifics and Conference Call Pursuant to the
terms of the merger agreement, Rabbit became a wholly owned subsidiary
of Digi. The cash purchase price was used to purchase all of the
outstanding shares of Rabbit stock and to buy out all outstanding Rabbit
stock options. Rabbit’s name was changed from Z-World, Inc. in the
merger. Digi will retain Rabbit’s office in Davis, California.
Digi expects Rabbit to contribute in excess of $2.0 million in revenue
for the third fiscal quarter of 2005 and in excess of $7.0 million for
the fourth fiscal quarter of 2005. Digi anticipates Rabbit to
contribute revenue in excess of $31 million for fiscal year 2006.
Digi anticipates that one-time expenses associated with the acquisition
will reduce earnings per diluted share by $0.04 to $0.06 for the third
fiscal quarter of 2005. Digi expects the Rabbit acquisition to be
accretive by $0.01 to $0.02 per diluted share in the fourth fiscal
quarter of 2005. For fiscal year 2006, Digi anticipates Rabbit to be
accretive by $0.03 to $0.06 per diluted share. Digi expects Rabbit’s
gross margin to be in a range of 51% to 53% in fiscal 2006.
Digi will host a conference call to discuss the transaction at 4:00 p.m.
Central Time on Thursday, May 26, 2005, and invites all those interested
to participate either by phone or on the Web. Participants can access
the call directly by dialing 1-800-633-8489. International participants
may access the call by dialing 212-676-4900. A replay will be available
for one week following the call by dialing 1-800-633-8284 for domestic
participants or 402-977-9140 for international participants and entering
access code 21248160 when prompted. Participants may also access a live
web cast of the conference call through the investor relations section
of Digi’s web site, www.digi.com.
About Digi International Digi International, based
in Minneapolis, makes device networking easy by developing products and
technologies that are cost effective and easy to use. Digi markets its
products through a global network of distributors and resellers, systems
integrators and original equipment manufacturers (OEMs).
For more information, visit Digi’s Web site at
www.digi.com, or call 877-912-3444 (U.S.) or 952-912-3444 (International).
About Rabbit Rabbit Semiconductor, Inc., based in
Davis California and formerly named Z-World, offers a complete line of
low-cost, high-performance embedded control solutions, including
single-board computers, operator interfaces, and core modules for
Internet/Ethernet connectivity. In 1989, Rabbit launched Dynamic C®, the
first integrated software development system specifically designed for
embedded single-board computers. This highly successful integration of
hardware and software substantially reduces development time and cost.
In November 1999, Rabbit launched a new fabless semiconductor division,
Rabbit Semiconductor, specializing in high-performance microprocessors.
Digi, Digi International, Net+, ConnectCore, Digi Connect ME, and the
Digi logo are trademarks or registered trademarks of Digi International
Inc. in the United States and other countries. Z-World, Dynamic
C and Rabbit Semiconductor are trademarks or registered trademarks
of Rabbit Semiconductor, Inc. All other brand names and product
names are trademarks or registered trademarks of their respective owners.
Forward-looking Statements This press release
contains statements that constitute "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended,
which generally can be identified by the use of forward-looking
terminology such as "anticipate," "believe," target," "estimate," "may,"
"will," "expect," "plan," "project," "should," or "continue" or the
negative thereof or other variations thereon or similar terminology.
Such statements are based on information available to management as of
the time of such statements and relate to, among other things,
expectations of the business environment in which the companies operate,
projections of future performance, perceived opportunities in the market
and statements regarding the combined company’s mission and vision,
future financial and operating results, and benefits of the transaction.
Such statements are not guarantees of future performance and involve
certain risks, uncertainties and assumptions, including risks related to
the highly competitive market in which the companies operate, rapid
changes in technologies that may displace products sold by the combined
company, declining prices of networking products, the combined company’s
reliance on distributors, delays in product development efforts,
uncertainty in consumer acceptance of the combined company’s products,
and changes in the companies’ level of revenue or profitability. These
forward-looking statements are neither promises nor guarantees, but are
subject to risk and uncertainties that could cause actual results to
differ materially from the expectations set forth in the forward-looking
statements, including but not limited to uncertainties associated with
economic conditions in the marketplace, particularly in the principal
industry sectors served by the combined company, changes in customer
requirements and in the volume of sales to principal customers, the
ability of the combined company to achieve the anticipated benefits and
synergies associated with this transaction, the challenges and risks
associated with managing and operating business in numerous
international locales, competition and technological change, and the
risks that the businesses will not be integrated successfully.
These and other risks, uncertainties and assumptions identified from
time to time in Digi’s filings with the Securities and Exchange
Commission, including without limitation, its annual reports on Form
10-K and quarterly reports on Form 10-Q, could cause future results to
differ materially from those expressed in any forward-looking
statements. Many of such factors are beyond Digi’s ability to control or
predict. These forward-looking statements speak only as of the date for
which they are made. The companies disclaim any intent or obligation to
update publicly any forward-looking statements, whether as a result of
new information, future events or otherwise.
Press Contacts:
S. (Kris) Krishnan
Digi International
952-912-3125
Investor Contacts: Kathryn McNeil
The Investor Relations Group
212-825-3210
For more information, visit Digi's Web site at www.digi.com, or call 877-912-3444 (U.S.) or 952-912-3444 (International).
All brand names and product names are trademarks or registered trademarks of their respective companies.
