DALLAS - DZS Inc. (NASDAQ:DZSI), a broadband networking and cloud software solutions company, has completed the divestiture of its Asia operations to DASAN Networks, Inc. The transaction, which was initially agreed upon on January 5, 2024, for $48 million, results in the elimination of approximately $43 million of DZS's debt, thereby reducing its long-term debt to $15 million.
This strategic move allows DZS to concentrate on markets in the Americas, Europe, Middle East, Africa, and Australia/New Zealand.
Charlie Vogt, President and CEO of DZS, expressed that the divestiture is in line with the company's focus on regions where significant government stimulus funds are being invested in fiber broadband infrastructure. The company's refined strategy is expected to enhance customer and shareholder value over the long term. DZS has invested around $130 million in research and development over the past three years, including three technology acquisitions, to bolster its fiber broadband and AI-driven cloud software solutions.
The sale of its Asia business is anticipated to position DZS for better financial margins, with a larger portion of revenue coming from recurring software licenses. DZS believes its open, standards-based, and software-defined solutions are increasingly favored by service providers over proprietary systems, especially with the growth of fiber broadband and 5G mobile transport.
In addition to this announcement, DZS disclosed that on April 1, 2024, it received a delinquency notification from the Nasdaq Stock Market for not timely filing its Annual Report on Form 10-K for the year ended December 31, 2023. The company has appointed BDO as its new independent registered public accounting firm and is working on completing a restatement of its finances.
While the Nasdaq notice does not immediately affect DZS's stock listing, the company is seeking an extension to resolve its filing delays.
This article is based on a press release statement from DZS.
InvestingPro Insights
DZS Inc. (NASDAQ:DZSI) has been undergoing significant changes, as reflected by the recent divestiture of its Asia operations. This move is expected to streamline the company's focus and reduce its debt burden. However, a look at the company's financials and market performance through InvestingPro reveals a challenging landscape. With a market cap of just $49.58 million and a negative P/E ratio of -0.74, the company's profitability is under scrutiny. The price return over the past year has seen a dramatic decline of -82.31%, underscoring the market's reaction to the company's performance.
One of the InvestingPro Tips highlights that DZS suffers from weak gross profit margins, which could be a concern for investors looking for financially robust companies. Additionally, the absence of dividend payments to shareholders limits the appeal for income-focused investors. On a brighter note, analysts predict the company will be profitable this year, which could signal a turnaround for DZS.
For investors seeking more in-depth analysis, there are additional InvestingPro Tips available for DZS at https://www.investing.com/pro/DZSI. These tips could provide valuable insights into whether the recent strategic moves will likely improve the company's financial health and market performance. To access these insights, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are four more InvestingPro Tips listed for DZS that could further inform investment decisions.
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