Filed by Sycamore Networks, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1934
Subject Company: Sycamore Networks, Inc.
The following communications contain forward-looking statements based on
current expectations, forecasts and assumptions that involve risk and
uncertainties that could cause actual outcomes and results to differ
materially. These forward-looking statements include, but are not limited
to, future product, market and technology development, future benefits of
the merger, estimated date to complete the transaction, and the expected
impact of the transaction on future earnings. These risks and uncertainties
include difficulties in the assimilation of operations, technologies and
products of Sirocco, diversion of management's attention from other
business concerns and risks of entering new markets.
For a further list and description of such risks and uncertainties that
could cause actual results to differ materially from such forward-looking
statements, see the reports filed by Sycamore with the SEC.
Investors and security holders are advised to read the documents filed by
Sycamore with the SEC regarding the business combination transaction
referenced in the foregoing information when they become available because
they will contain important information. Investors and security holders may
obtain a free copy of the documents regarding the referenced business
combination transaction (when available) and other documents filed by
Sycamore at the SEC's web site at www.sec.gov. The documents regarding the
referenced business combination transaction and such other documents may
also be obtained from Sycamore by directing such request to Sycamore
Networks, Inc., Attn: Terry Adams, Investor Relations, 10 Elizabeth Drive,
Chelmsford, MA, 01824.
THE FOLLOWING IS AN "AS SPOKEN" TRANSCRIPT OF A TELEPHONE CONFERENCE CALL
WITH ANALYSTS AND OTHERS HELD ON JUNE 6, 2000
SIROCCO CONFERENCE CALL
Operator: Ladies and gentlemen, thank you for standing by. Welcome to
the Sycamore Sirocco conference call. At this time, all
participants are in a listen-only mode. Later, we will
conduct a question-and-answer session. At that time, if you
have a question, you will need to press the one, followed
by the four on your push-button phone. As a reminder, this
conference call is being recorded, today, Tuesday, June 6,
2000. I would now like to turn the conference over to Mr.
Terry Adams, Vice President of Investor Relations. Please
go ahead sir.
Terry Adams: Thank you, Liz. Good morning, everyone. Welcome to the
Sycamore Sirocco conference call. We're here in Atlanta.
I'm Terry Adams. With me today are Dan Smith, our President
and CEO; also, President, Frances Jewels, our CFO; Kevin
Oye, Vice President of Business Development; and Jonathan
Reeves, President and CEO of Sirocco Systems. Dan will
begin the call today by reviewing the strategic and
business rationale for the acquisition of Sirocco Systems,
which was announced early this morning on the wire. If you
have had the chance, it's also in the "Wall Street
Journal". After Dan concludes, Frances will summarize the
financial and accounting issues associated with this
acquisition. We will then take questions.
The announcement of today's transaction, again, was
distributed at 6 am this morning on the business wire and
on First Call. You can also retrieve a copy of this press
release from our website at www.sycamorenet.com.
At this point, I'd like to note that the matters we will be
discussing today, may include forward-looking statements
and as such are subject to the risks and uncertainties that
we discuss in detail in our most recently filed S-1 with
the SEC. It identifies important risks factors that could
cause actual results to differ from those contained in the
forward-looking statements.
At this point, I'd like to turn the call over to Dan Smith,
who will be discussing the business combinations.
Dan Smith: Thanks, Terry and good morning to everyone. I'm pleased to
announce that Sycamore has reached an agreement to acquire
Sirocco Systems of Wallingford, Connecticut, the leading
developer of Metro Intelligent Optical Access Solutions.
Currently, the metro market has two significant segments;
Metro Core and Metro Access. Sirocco Systems extends
Sycamore's product portfolio by combining Sirocco's leading
Metro Access Solutions with Sycamore's strong Metro Core
Solutions, the SNA 8000 MC, which began shipping early this
year. The addition of Sirocco Metro Access Edge Solutions
now provides Sycamore with a complete intelligent optical
networking portfolio, extending from the edge of the
enterprise, across the Metro Access and Core Networks and
through the regional and long haul backbone, combining both
transport and intelligent optical switching solutions. The
addition of the Sirocco product line significantly expands
the market opportunity addressed by Sycamore and markedly
broadens the solution we can offer our customers. According
to "Pioneer Research", the market for Metro Core products
is estimated to be approximately $2.3 billion by 2004. The
market for Metro Access product is estimated to be nearly
$17.3 billion in the same year. Sycamore will now
participate in both of these growing markets. Sirocco has
created an innovative family of optical edge products. They
consist of Zephyr, the optical access device; Typhoon, the
optical edge switch; and Tempest, the very comprehensive
network management platform. Zephyr and Typhoon are
universal platforms, reporting TDM or Tunnel Division
Multiplexing; ATM and packet based IP services. Sirocco's
unique approach allows a single platform to support
multiple services. Existing competitors optical edge
products are optimized to support a single service. In
other words, they optimally support either ATM, IP or TDM.
Single focused products are inherently easier to develop,
but do not offer service providers a high level of
flexibility and integration that universal platforms do. In
addition to supporting multiple services, the Zephyr and
Typhoon products support the widest range of interfaces and
highest density available in the industry with the smallest
footprint. Perhaps equally or more impressive, is the
switching capability inherent in the Sirocco product line,
along with the distributed intelligence of the switches in
the network management system. Zephyr, Typhoon and Tempest
compliment and augment Sycamore's already strong optical
switching products and technology by extending switching
and intelligence to the edge of the optical network. Zephyr
and Typhoon support a broad set of interfaces, including
not only DS3, Post Seat[sp]12 and 48, but also OC 192 and
Gigabit Ethernet. Furthermore, Typhoon packs 360 DS3's into
a seven foot bay, the most of any product announced to
date.
The first products from Sirocco are expected to be
available in the fourth quarter of the calendar year 2000.
While both Sirocco and Sycamore realized early on that
while maximizing optical bandwidth is important, both
companies believe that it is much more important to create
services, which generate revenue for service providers.
Both companies realize the value of incorporating switching
intelligence into the respective products. Even though the
concept was pioneered by Sycamore, Sirocco understood and
shared our vision of the power of soft optics, which
introduces intelligent routing, control and management
capabilities under the optical network, fundamentally
changing the value proposition of the optical domain from
dumb pipes to revenue generating services. The management
of Sirocco products will be easily accomplished through the
integration of Sycamore's industry leading Silvx Network
Management platform. The addition of Sirocco, allows
Sycamore to extend the vision and capabilities of
intelligent optical networking to the edge of the optical
network.
No longer will there be pockets of unintelligent resources
or capacity. All areas of the network will contribute to
services and revenue generation.
In addition to the unique product architecture, Sirocco
represents a world class team of 125 networking
professionals with a very successful track record of
developing innovative new products in companies such as
Sahara Networks, Cascade and Ascend. Jonathan Reeves and
his team has executed it extremely well. We believe that
the combination of their products and their people, with
those of Sycamore, represents the strongest team in optical
networking portfolio in the industry.
I'd now like to spend a few moments on the business
structure. Sycamore recently formed several business units
within the company to focus on key product initiatives and
market opportunities. These are core switching, transport,
and ultra long haul transport. These business units have
all the developments and product management resources
necessary for success in their respective markets. The
Central Engineering Unit was also created to provide
unified routing and signaling technology in the network
management across the product lines. In addition, the
Central Engineering will ensure that leading edge optical
and other technologies will be shared and reutilized across
all business units through the company's Chief Technology
Officer. Sycamore retains central sales, general and
administrative, operations and marketing organizations,
which will support all the business units. Sirocco will
join the Sycamore organization as the Optical Access
products business unit and will be headed by Jonathan
Reeves, currently the CEO of Sirocco. He will be Vice
President and General Manager of this unit, reporting to
me. We do not expect any reduction in headcount at Sirocco
as a result of this merger.
At this point, I'd like to turn it over to Frances Jewels,
our CFO. She'll be glad to address the further financial
details concerning this transaction.
Frances Jewels: Thanks, Dan. I'd like to spend a minute on the financial
details associated with the acquisition of Sirocco.
Sycamore has agreed to exchange 28.4 million shares of its
common stock for all outstanding Sirocco shares and
options. [unintelligible] Sycamore's closing price of
$102.94 on June 5, 2000. The transaction is valued at
approximately $2.9 billion. The acquisition will be treated
as a pooling of interests and is expected to be completed
in Sycamore's first fiscal quarter of 2001. The transaction
is subject to customary closing conditions and regulatory
approval, including Hart-Scott-Rodino and approval of
Sirocco's shareholders. A sufficient number of Sirocco
shareholders have signed voting agreements to insure the
required approval of this transaction. Both Sirocco's and
Sycamore's Board of Directors have already approved the
execution of the definitive merger agreement. On the
financial side, we expect this transaction to become
accretive in mid-fiscal year 2002.
At this point, I'd like to turn the call back to Terry
Adams.
T. Adams: Thank you, Frances. Liz, at this point, we'd like to open
the conference call to questions.
Operator: Ladies and gentlemen, we will now begin the question-and-answer
session. If you have a question, please press the one,
followed by the four on your push-button phone. You will
hear a three tone prompt, acknowledging your request. If
you question has been answered and you would like to
withdraw your polling request, you may do so by pressing
the one, followed by the three. If you are using a speaker
phone, please pick up your handset before entering your
request. One moment, please, for the first question.
Our first question comes from Max Schuetz with Thomas
Weisel Partners. Please go ahead with your question or
comment.
Max Schuetz: Good morning, guys and congratulations. I have a question
on the optical management system. When do you expect to see
the Sirocco product integrated with the Silvx Management
System or do you plan on using the Tempest Management
System at the edge and integrating the two systems
together?
Kevin Oye: Currently, because both companies pursue a very similar
approach in architecture and network management, we expect
to integrate the Silvx Management System fairly quickly, so
that our customers will experience 1), network management
interface, 2) a total end-to-end--
[transmission interrupted]
Kevin Oye: Max, do you have a follow-up?
M. Schuetz: The other question is on the signaling protocols between the
boxes. Is there any integration there or are they both MPLS
based signaling protocols already.
Kevin Oye: By the way, this is Kevin Oye answering this question.
Once again, another one of those beautiful synergies
between the two companies is that the two companies both
recognize the value of using intelligence and distributed
routing and signaling protocols. Both companies are using
OSPF at the routing levels and both companies are using the
common signaling approach. So, we expect that with time,
they'll be a very rapid and smooth integration at both the
routing and signaling levels. This way, they'll have a
common intelligence networking architecture across the
portfolio.
M. Schuetz: OK. Fantastic. Thanks and congratulations.
Operator: Our next question is from Steve Levy with Lehman Brothers.
Please go ahead with your question or comment.
Steve Levy: I apologize for asking this, but the volumes going in and out,
Fran, could you just--I think you said at the end what you
thought the dilution was likely to be. If you could just
repeat that. My second question is for Kevin. If you could
just go back--the timing of the integration of the network
management systems, will that be completed by the time the
product is commercially available?
F. Jewels: Steve, I'll take the first part of your question. The
transaction will be accretive by mid-fiscal year 2002.
S. Levy: OK.
K. Oye: On the network management side, I can't be more explicit, but
we fully expect that the integration will be completed by
[inaudible passage] products in production.
S. Levy: Great. Thank you.
Operator: Our next question comes from Jim Parmelee from Credit Suisse
First Boston. Please go ahead with your question or
comment.
Jim Parmelee: Just two clarifications. Actually, I'm still having trouble
hearing, Fran, the timing of accretion or dilution. Could
you just mention that just one last time? In terms of the
first product introduction, what quarter will that be in?
Thank you.
F. Jewels: Sorry about that. Is this better?
J. Parmelee: Yes, thanks.
F. Jewels: The transaction will be accretive by mid-fiscal year 2002.
J. Parmelee: Great.
D. Smith: Jim, we expect to be entering initial field trials in the
June/July time frame of this calendar year with more
extensive field trials in Sycamore's fiscal Q1 and achieve
first customer ship status by the end of the calendar year
2000.
J. Parmelee: Great. And just a quick follow-up, Dan. Will the field trials
will be with an existing Sycamore customer or with an
incremental customer?
D. Smith: I think the first one will be an incremental customer.
Operator: If there are any additional questions, please press the one,
followed by the four at this time.
Truc Do with Wit Soundview, please go ahead with your
question or comments.
Truc Do: Yes, could you give us an idea on how is the revenue ramps
would look like in the next couple years or so? I actually,
the volume is still coming in and out and I'm not sure
about what you have said about when the shipments will
begin and what kind of revenue expectation that you have
for this product.
D. Smith: Well, I apologize for the audio quality. We'll attempt to
repeat that. Again, we expect to begin initial field trials
in the June and July time frame of this calendar year. We
expect to have more extensive field trials in Sycamore's
first quarter fiscal year and we expect to achieve first
customer ship status at the end of the calendar year 2000
and having the product entering the revenue stream
following that. We would expect that we would ramp revenue
over the balance of our fiscal '01 and ramp significantly
in fiscal '02.
T. Do: Thanks. Could you also comment in terms of, recently Lucent
bought Chromatis and whether that is something similar to
Sirocco or any differentiation between those two companies?
K. Oye: Truc, this is Kevin. Principally, the approach is [inaudible
passage]--one that is not optimized around a particular
protocol. We are also looking for a scaleable family of
products, one that we could put very small devices on the
very edge of the network, where you have maybe a low count,
but also that were scaleable to very high density. Thirdly,
we are looking for something that has something
[unintelligible] on that scaleability side. We also wanted
something that scaled from not only OC3, 12 and 48, but
also OC 192. Thirdly, we are looking for a family of
portfolio products that [unintelligible] that understood
that intelligent switching and the intelligent software
that goes with it, are getting fully distributed through
the access layer and that the access layer is no longer
going to be a set of dumb types of access [unintelligible]
that are going to become fundamentally very agile and
dynamic and intelligent lines of cells. If you look at all
three of those dimensions, Sirocco hits the bell in all
three of these dimensions, while Chromatis falls short.
Chromatis is an optimizer in a particular protocol, ATM in
their case. If you look at their products, they're not as
scaleable as the portfolio that Sirocco brings on. For
example, they don't have the smaller equipment devices to
go with the higher densities. Also, Chromatis simply only
stops at OC 48, whereas in their first product, they would
have the OC 192 interface in the Sirocco portfolio.
Fundamentally, the approach that Sirocco takes is the
switching approach, as opposed to the multiplexing
approach. Thirdly, on the intelligent side, as we said
earlier on, Sirocco and Sycamore share the division of the
intelligent distributed optical networking, whereas,
Chromatis took a more traditional dumb access approach.
T. Do: Great. Thank you.
Operator: Chet White from First Securities Van Kasper, please go ahead
with your question.
Chet White: Good morning. I was wondering if you could make two quick
comments? One, does this solution have DWDM? Also, you
mentioned that you have switching and routing capability.
Will that also go into Layer 4 or just into Layer 2 or 3?
K. Oye: [inaudible passage]--they do have that in their portfolio
today and it's an additional synergy point for us. On the
intelligent side, it turns out that for these parts of the
network, where you're doing the aggregation, certainly you
need to be doing the intelligent things in Layers 2 and 2+,
which is taking some of that [inaudible]. But, these layers
of the networks, you simply cannot should not be looking at
the application layer at Layer 4. Those are usually more
traditionally managed by devices that stick within the
enterprise networking environment and the [inaudible]
content side of it of a service provider.
C. White: OK. Thank you very much.
Operator: David Jackson with Morgan Stanley Dean Witter, please go ahead
with your question.
David Jackson: Good morning and congratulations. Could you elaborate a
little bit more on the density of the products in terms of
how many T1's they aggregate? And then on the trunk side,
how many wave lengths they interface to on the trunk side
of the boxes?
K. Oye: [inaudible passage]--and on the DWDM side, they, once again,
they have a scaleable family. They can travel wave length
all the way up to eight wave lengths on the access side of
the pipe. That's for the existing first generation of the
product. Architecturally, they can scale higher than that
as we see customer needs evolving.
D. Jackson: Great. And when do you think you're going to have OC 192
available?
K. Oye: Well, it turns out it's actually [inaudible passage].
D. Jackson: Great. Thanks very much and congratulations again.
T. Adams: This is Terry. That's a good point. In addition to the Sirocco
announcement we made this morning, you'll also see a number
of other product announcements associated with our existing
product line talked about here in Atlanta. You'll have
access to those later today on the wire services.
Do we have any other questions?
Operator: There are no further questions. Please continue with your
presentation or any closing remarks.
T. Adams: Well, I appreciate everybody joining us. If there's additional
questions, as you know, we're down here in Atlanta today in
a hotel room with a less than satisfactory speaker phone.
But, if we have a chance to talk to you over the days
ahead, we look forward to giving you greater detail and
insight to what we're doing. For those who are in Atlanta,
we look forward to seeing you here in the near future.
Thank you again.
Operator: Ladies and gentlemen, that concludes our conference for today.
You may all disconnect and thank you for participating.
