Encourages them to urge Ceragon Board to consider Aviat's
premium acquisition proposal
Emphasizes destruction of value under current Ceragon
leadership
AUSTIN,
Texas, July 12, 2022 /PRNewswire/ -- Aviat
Networks, Inc. (NASDAQ: AVNW) ("Aviat"), the leading expert in
wireless transport solutions, today issued an open letter to
shareholders of Ceragon Networks Ltd. (NASDAQ: CRNT) ("Ceragon" or
"the Company"), encouraging them to urge the Ceragon Board of
Directors (the "Board") to seriously consider Aviat's acquisition
proposal, which continues to provide Ceragon shareholders with the
opportunity to receive an immediate and certain cash premium. The
proposal follows Aviat's numerous attempts to engage in a
constructive dialogue with Ceragon and reach a mutually beneficial
agreement that would serve the interests of all shareholders.
Dear fellow Ceragon shareholders:
As the third largest shareholder of Ceragon, we are concerned
about the Company's continued poor performance and prospects, and
based on the calls we have received since publicly announcing our
proposal to acquire Ceragon on June
27th (U.S.) / June
28th (Israel),
we believe that many of you may share our concerns.
During the last five years, Ceragon stock has declined 12%,
while the Russell 2000 has appreciated by 33% in the same
timeframe. Ceragon is therefore underperforming the market by a
differential of 45 percentage points. The Company's gross margin
has declined from 34% in calendar year 2019 to 30% over the last
twelve months, during which time Ceragon has generated negative
free cash flow of $42 million. The
strategy of the current leadership team simply is not working.
While Ceragon leaders say things are going to turn around, much of
its forecasted improvement is based on the rollout of a next
generation chip that has been repeatedly delayed, first under the
leadership of the Company's former CEO Ira
Palti, who served in the position until July 2021, and now under his successor,
Doron Arazi.
As CEO, Mr. Palti underestimated the impact of supply chain
disruptions, mismanaged the chip development process, and
miscalculated the anticipated timeline of the product rollout.
Specifically, on August 2, 2020, Mr.
Palti told shareholders that the estimated time from chip
development to manufacturing to the next generation product rollout
would be around 12 months, but on February
8, 2021, he revised this timeline to 18 months. The view of
the current management team is that the chip will be ready by the
end of this year, which is already well over a year behind
schedule. Given the supply challenges in the chip space, which the
Company has itself noted may cause further delays, we see no reason
to believe this product won't continue to slip in its delivery to
the market. We believe the delay is primarily the result of Ceragon
attempting to reach outside its area of competency to develop a
chip when it would be faster and more efficient to partner with a
company that solely develops chips and can execute immediately.
Thus, when Ceragon's new chip is eventually rolled out, we believe
it will already lag the market in many of its performance
attributes.
Mr. Palti would like you to believe that there is no competitive
alternative to spending two or more years developing a chip
in-house, but this is wrong. In contrast, Aviat partnered with an
expert to create just such an alternative. Aviat's next generation
System on Chip (developed in partnership with MaxLinear) will be a
more capable commercial alternative based on a newer generation of
technology than Ceragon's chip, enabling network OEMs and operators
to deliver ultra-high-capacity payloads, over longer distances,
with the lowest possible total cost of ownership. We believe
Ceragon's chip will consume more power and create cost, system
design, and supply chain challenges. This type of chip problem
could require a redesign at a different node to achieve
competitiveness, leaving Ceragon with a technological deficit and
additional expense over the long-term.
Because of poor decisions and execution, we fear that Ceragon's
standalone prospects are diminished, and that its underperformance
will continue unless the Board takes action. To date,
unfortunately, the path Ceragon's Board has chosen is
inaction. The architect of the failed strategy, Mr. Palti, now
holds a seat on the Board of Directors, and we believe his presence
will hinder any efforts to fix the mistakes he committed, and
instead continue to foster a culture of underperformance.
We recognize that as the new CEO, Mr. Arazi has been put in a
very difficult position, because Mr. Palti's continued
participation on the Board undermines any actions that Mr. Arazi
could take to correct Mr. Palti's mistakes. By his presence, Mr.
Palti has wedded the Board to its failed strategy, and he has
publicly expressed that Ceragon is wholly committed to seeing this
strategy through, making it very difficult for Mr. Arazi to propose
a change in strategy. This is one of many reasons why we are
proposing to remove Mr. Palti from the Ceragon Board and replace
him and other certain directors who lack sufficient independence to
act in the best interest of shareholders with new, highly-qualified
independent directors who can objectively evaluate all strategic
proposals.
You deserve a Board that has the independence and the
judgment to do the right thing for shareholders. Aviat sought
repeatedly to negotiate a transaction with Ceragon that could
provide shareholders with certain and immediate value, would solve
Ceragon's chip issues, and offers a plan to leverage Ceragon
capabilities beyond microwave backhaul. Instead, your Board members
dug in their heels, resorting to delay tactics that seem intended
to keep their Board seats and jobs but deliver no value to
shareholders. They continue to ask you to patiently endure quarter
after quarter of poor results, delays, and unfulfilled promises. In
the weeks since we first made our current offer to acquire Ceragon
in April, the Company's stock price has dropped sharply (until it
rebounded in response to our public proposal last month), which
demonstrates that you, our fellow shareholders, are running out of
patience.
Now Ceragon shareholders have a real choice: you can continue to
endure continued execution risk in the hope of greater value at
some distant point in the future, or you can make your voices heard
and demand that the Board engage in discussions regarding Aviat's
premium acquisition offer.
Here is how you can do this:
- Call or email Ceragon to demand that the Board fulfill its
fiduciary duties and engage in a negotiation with Aviat:
Zvi Maayan
EVP, General Counsel & Corporate Secretary
zvim@ceragon.com
Maya Lustig
Head of Investor Relations
+972 54-677-8100
mayal@ceragon.com
You can copy and paste the language below or write your own
message:
Dear Ceragon Board,
As a shareholder that has suffered value destruction for
too long, I urge you to take seriously your fiduciary duties and
negotiate a premium transaction with Aviat that will deliver
significant value for shareholders. We support Aviat's efforts to
enter into a negotiated transaction and, should you continue to
block this transaction, are prepared to support new directors who
are willing to pursue opportunities for value creation.
- Vote to add independent, experienced directors to the
Ceragon Board who are committed to evaluating all options for value
creation.
Aviat has called for an extraordinary meeting of
shareholders that will allow shareholders to elect new independent
directors more open to value creating alternatives to the current
failed strategy. While voting hasn't commenced yet, you will soon
receive a proxy statement and proxy voting card. It is imperative
that you use this proxy card to vote FOR the expansion of the
Board, FOR the removal of three current directors, and FOR the
election of the five new independent director nominees, and sign
and return it. Your proxy card will also have information for
voting online or by telephone. If you are not sure whether you have
received this card, contact Okapi Partners at 212-297-0720.
If our fellow shareholders take these two actions, we are
hopeful that the Ceragon Board will fulfill its duty and work
towards a transaction with Aviat. Please contact Ceragon at your
earliest convenience to make your voice heard.
Sincerely,
Peter A. Smith
Aviat Networks
President and Chief Executive Officer
About Aviat Networks,
Inc.
Aviat Networks, Inc. is the leading expert in wireless
transport solutions and works to provide dependable products,
services and support to its customers. With more than one million
systems sold into 170 countries worldwide, communications service
providers and private network operators including state/local
government, utility, federal government and defense organizations
trust Aviat with their critical applications. Coupled with a long
history of microwave innovations, Aviat provides a comprehensive
suite of localized professional and support services enabling
customers to drastically simplify both their networks and their
lives. For more than 70 years, the experts at Aviat have delivered
high-performance products, simplified operations, and the best
overall customer experience. Aviat Networks is
headquartered in Austin, Texas. For more information,
visit www.aviatnetworks.com or connect with Aviat
Networks on Twitter, Facebook and LinkedIn.
Forward-Looking
Statements
The information contained in this document includes
forward-looking statements within the meaning of the safe harbor
provisions of the U.S. Private Securities Litigation Reform Act of
1995. Such statements include, without limitations, statements
regarding the proposed transaction between Aviat and Ceragon, the
results of the requested extraordinary general meeting of
shareholders of Ceragon and Ceragon's actions in connection
therewith. All statements, trend analyses and other information
contained herein regarding the foregoing beliefs and expectations,
as well as about the markets for the services and products of Aviat
and trends in revenue, and other statements identified by the use
of forward-looking terminology, including, without limitation,
"anticipate," "believe," "plan," "estimate," "expect," "goal,"
"will," "see," "continue," "delivering," "view," and "intend," or
the negative of these terms or other similar expressions,
constitute forward-looking statements. Forward-looking statements
are neither historical facts nor assurances of future performance.
Instead, forward-looking statements are based on estimates
reflecting the current beliefs, expectations and assumptions of the
senior management of Aviat regarding the future of its business,
future plans and strategies, projections, anticipated events and
trends, the economy and other future conditions. Such
forward-looking statements involve a number of risks and
uncertainties that could cause actual results to differ materially
from those suggested by the forward-looking statements.
Forward-looking statements should therefore be considered in light
of various important factors, including those set forth in this
document. Therefore, you should not rely on any of these
forward-looking statements. Important factors that could cause
actual results to differ materially from estimates or projections
contained in the forward-looking statements include the
following:
- the impact of COVID-19 on our business, operations and cash
flows;
- continued price and margin erosion as a result of increased
competition in the microwave transmission industry;
- our ability to realize the anticipated benefits of any proposed
or recent acquisitions, including our proposed transaction with
Ceragon, within the anticipated timeframe or at all, including the
risk that proposed or recent acquisitions will not be integrated
successfully;
- the results of the extraordinary general meeting of Ceragon's
shareholders;
- the impact of the volume, timing, and customer, product, and
geographic mix of our product orders;
- the timing of our receipt of payment for products or services
from our customers;
- our ability to meet projected new product development dates or
anticipated cost reductions of new products;
- our suppliers' inability to perform and deliver on time as a
result of their financial condition, component shortages, the
effects of COVID-19 or other supply chain constraints;
- the effects of inflation and the timing and extent of changes
in the prices and overall demand for and availability of our
inputs;
- customer acceptance of new products;
- the ability of our subcontractors to timely perform;
- weakness in the global economy affecting customer
spending;
- retention of our key personnel;
- our ability to manage and maintain key customer
relationships;
- uncertain economic conditions in the telecommunications sector
combined with operator and supplier consolidation;
- our failure to protect our Intellectual property rights or
defend against Intellectual property infringement claims by
others;
- the results of our restructuring efforts;
- the ability to preserve and use our net operating loss
carryforwards;
- the effects of currency and interest rate risks;
- the effects of current and future government regulations,
including the effects of current restrictions on various commercial
and economic activities in response to the COVID-19 pandemic;
- general economic conditions, including uncertainty regarding
the timing, pace and extent of an economic recovery in the United States and other countries where we
conduct business;
- the conduct of unethical business practices in developing
countries;
- the impact of political turmoil in countries where we have
significant business;
- the impact of tariffs, the adoption of trade restrictions
affecting our products or suppliers, a United States withdrawal from or significant
renegotiation of trade agreements, the occurrence of trade wars,
the closing of border crossings, and other changes in trade
regulations or relationships; and
- Aviat's ability to implement our stock repurchase program or
the extent to which it enhances long-term stockholder value.
For more information regarding the risks and uncertainties for
Aviat's business, see "Risk Factors" in Aviat's Annual Report on
Form 10-K filed with the U.S. Securities and Exchange Commission
("SEC") on August 25, 2021 as well as
other reports filed by Aviat with the SEC from time to time. Aviat
does not undertake any obligation to update publicly any
forward-looking statement, whether written or oral, for any reason,
except as required by law, even as new information becomes
available or other events occur in the future.
Additional
Information
This document does not constitute an offer to sell or exchange,
or the solicitation of an offer to buy or exchange, any securities,
nor will there be any sale of securities in any states or
jurisdictions in which such offer or sale or exchange would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offering of securities
will be made except by means of a prospectus meeting the
requirements of section 10 of the Securities Act of 1933 or an
exemption therefrom.
In connection with any transaction between Aviat and Ceragon
that involves the issuance of Aviat shares to the Ceragon
shareholders, Aviat will file a registration statement with the
SEC. INVESTORS ARE URGED TO READ THE REGISTRATION STATEMENT, ANY
AMENDMENTS THERETO AND OTHER RELEVANT DOCUMENTS THAT MAY BE FILED
WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
TRANSACTION. Investors will also be able to obtain copies of the
registration statement and other documents containing important
information about each of the companies once such documents are
filed with the SEC, without charge, at the SEC's web site at
www.sec.gov.
Investor Contacts
Aviat Networks
Andrew Fredrickson
+1-408-501-6214
andrew.fredrickson@aviatnet.com
Okapi Partners LLC
Bruce Goldfarb / Chuck Garske / Teresa
Huang
+1-212-297-0720
info@okapipartners.com
Media Contact
Abernathy
MacGregor
Sydney Isaacs / Jeremy Jacobs
+1-212-371-5999
sri@abmac.com / jrj@abmac.com
View original content to download
multimedia:https://www.prnewswire.com/news-releases/aviat-networks-issues-open-letter-to-ceragon-networks-shareholders-301585125.html
SOURCE Aviat Networks, Inc.