PE Week Wire — Friday, September 30

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Random Ramblings

A few notes for those not taking three-day weekends (or four-day weekends, for our German readers)…

Hand-In-Glove: That’s how Steve Meredith of Edwards & Angell LLP is describing his firm’s upcoming merger with Palmer & Dodge LLP. Specifically, Meredith is talking about the combined venture capital and private equity practice, which will feature around 75 attorneys (50 from E&A, 25 from P&D): “On the private equity and VC side, Palmer & Dodge’s strong suit is in life sciences, which is probably our weak suit. However, we are very strong in life sciences IP, and actually acquired a very high-end life sciences IP firm several years ago that we’ve been waiting to capitalize on. This is a true synergy in all of the ways people speak of that word.”

No major defections are expected from either firm, although certain attorneys may need to leave due to unspecified conflicts of interests. Also, don’t expand any West Coast expansion yet, with Meredith and each firm’s managing partner saying no such plans are in the works (although they have, obviously, given it some thought).

LP Allocation: Buyouts Magazine on Monday will publish year-to-date/Q3 buyouts fundraising totals, plus a brilliant analysis written by your humble correspondent. One thing that I really didn’t get to in the piece, however, is a growing concern among LPs that participation in mega-buyout funds is having a devastating impact on their portfolio diversification goals. All LPs want “meaningful” stakes in their general partnerships, so a typical commitment to Blackstone completely dwarves single commitments to most VC or lower-market buyout firms. In fact, it could take nearly a dozen VC commitments to equal a single mega-fund commitment.

All LPs give at least lip service to market cycles and portfolio diversification, but some are beginning to openly question whether or not this dichotomy is viable. Some have simply said “no thanks” to the mega-funds, not wanting to rely so heavily on one or two decisions. Perhaps more importantly, many of the “no thanks’ managers are doing so because they need to outperform ROI benchmarks in order to get bonuses, and it is hard to outperform when you are in the same funds as everyone else. Conversely, some LPs are feeling that the way to go is big buyouts at the expense of VC/small-markets, because it makes no sense to spend 10x the due diligence on 10 VC funds, when you could spend 1x on a mega-buyout fund with a strong track record.

Everyone’s a Fan: My favorite Boston moment of the year came yesterday afternoon at around 3:30. I was supposed to walk a mile down the road to meet with a VC firm, whose managing partner was in from Europe. As I looked through some large windows at my office, however, I realized that the city was playing host to a violent wind and rain storm, which would leave me soaked and miserable. I muttered an obscenity under my breath, at which point a passerby tapped me on the shoulder and said: “Don’t worry, it’s supposed to end before game-time.”

Go Sox.

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    Top Three

 

Wellspring Capital Management has agreed to sell JW Aluminum Holding Co. for $350 million to Superior Plus Inc., a U.S. subsidiary of Calgary, Canada-based Superior Plus Income Funds. JW Aluminum is a Mount Holly, S.C.-based manufacturer of specialty, flat-rolled aluminum products, and was acquired by Wellspring in December 2003 for $125 million. www.wellspringcapital.com www.jwaluminum.com

NetByTel Inc., a Boca Raton, Fla.-based provider of managed speech recognition solutions to call centers, has agreed to acquire Tuvox Inc., a Los Altos, Calif.-based provider of enterprise speech applications. No financial terms were disclosed for the deal, which is expected to close today. NetByTel has raised around $40 million in VC funding from firms like Noro-Moseley Partners, Lazard Technology Partners, Chrysalis Ventures and Time Warner Ventures. Tuvox has raised around $26.5 million in total VC funding, including a $15 million Series D infusion in late 2004 at a post-money valuation of approximately $55 million. Tuvox backers include Granite Ventures, Foundation Capital and Norwest Venture Partners. www.netbytel.com www.tuvox.com

WestView Capital Partners has closed its inaugural fund with $195 million in capital commitments. The Boston–based firm was formed in mid-2004 by Carlo von Schroeter, formerly a partner of Weston Presidio, and Richard Williams, formerly a partner of Tudor Ventures. It plans to use the fund to participate in buyouts, minority and majority recapitalizations and growth financings for lower-middle-market companies. www.wvcapital.com

    VC Deals

 

Pervasis Therapeutics Inc., a Cambridge, Mass.-based developer of therapies that integrate biomaterials with cells and drugs, has raised $12 million in Series B funding. Highland Capital Partners led the deal, and was joined by return backers Polaris Venture Partners and Flagship Venture Partners. www.pervasistx.com

Sports Loyalty Systems, a Boston-based provider of customer loyalty programs for Major League Baseball franchises, has raised $5 million in Series A funding. IDG Ventures co-led the deal alongside LBO Enterprises, which is principally owned by Boston Red Sox vice-chairman Les Otten. www.sportsloyaltysystems.com

NEXX Systems Inc., a Billerica, Mass.-based provider of processing equipment for wafer-level packaging applications, has raised around $10 million in Series C funding. Sigma Partners led the deal with a $6.375 million commitment. The remainder involved certain NEXX shareholders converting outstanding bridge loans plus accrued interest into Series C preferred stock. www.nexxsystems.com

    Buyout Deals

 

Fenway Partners has agreed to acquire Targus Group International Inc., an Anaheim, Calif.–based provider of mobile computer carrying cases. The deal is valued at $382.5 million, with Fenway acquiring Targus Group from Apax Partners. www.targus.com www.fenwaypartners.com

Colony Capital LLC has completed its $859 million acquisition of Raffles Holdings Ltd.’s hotels business. www.raffles.com www.colonyinc.com

KPS Special Situations Funds has agreed to acquire the North American automotive business (a.k.a. Blue Water) of Sarna Kunststoff Holding AG. No financial terms were disclosed. www.kpsfund.com

Goldner Hawn Johnson & Morrison has increased the terms of its proposed acquisition of Green Bay, Wis.-based retailer ShopKo Stores Inc. (NYSE: SKO) from $25 per share to $25.50 per share. This is the second deal amendment, with GHJM raising the ante from $24 to $25 per share earlier this month. The deal has been approved by the ShoKo board, with a shareholder meeting scheduled for October 17. www.shopko.com

Palamon Capital has agreed to acquire a 52.6% stake in discount card provider Payback from Deutsche Luftansa AG, in a deal valuing Payback at over 225 million euros. The news was first reported by The Financial Times, and confirmed by Deutsche Luftansa this morning.

News Corp. (NYSE: NWS) is closed to selling UK-based educational publisher TSL Education to Exponent Private Equity, according to The Wall Street Journal. The deal price is reported to the $450 million, which is in the middle of the Gbp250 million and Gbp280 million that News Corp. had been looking for, according to an earlier report in The Deal. Other bidders included Apax Partners, Candover and The Carlyle Group.

Legal & General Ventures has sold its minority stake in UK-based Haley Conference Centres to 3i Group. The Gbp41 million deal valued Haley at more than Gbp180 million. www.3i.com

    PE-Backed IPOs

Avalon Pharmaceuticals Inc., a Germantown, Md.-based developer of small-molecule therapeutics for cancer, priced 2.75 million common shares at $10.50 per share, for an IPO take of approximately $28.87 million. It originally planned to sell 4.5 million shares at between $10 and $12 per share, but later lowered its expectations. WR Hambrecht & Co. served as lead underwriter, and utilized its OpenIPO process. Avalon had raised over $90 million in VC funding since its 1999 inception, with significant shareholders including AIG Global Investment Group, EuclidSR Partners, Forward Ventures, GIMV, OBP Management, CDP Capital, MDS Capital, H&Q Healthcare and Array Capital. www.avalonrx.com

VistaPrint Ltd., a Bermuda-based holding company for Lexington, Mass.-based graphic design and printing services provider VistaPrintUSA Inc., priced nearly 10.02 million common shares at $12 per share (above its $9-$11 range), for an IPO take of approximately $120 million. Goldman Sachs and Bear Stearns served as lead underwriters. VistaPrint had raised around $76 million in total VC funding since its 1995 inception, with significant shareholders including Highland Capital Partners, HarbourVest Partners, SPEF Ventures, Sofinnova Partners and Window to Wall Street Inc. www.vistaprint.com

Castle Brands Inc., a New York-based maker and marketer of premium branded spirits, has filed to raise over $31.62 million via an IPO of 2.5 million shares of common stock. It plans to trade on the AMEX under ticker symbol ROX, with Oppenheimer & Co. serving as lead underwriter. The company was formed via the 2003 merger of Great Spirits Co. and The Roaring Water Bay Spirits Group, and has raised over $50 million in private equity funding, with significant shareholders including Mellon HBV, Black River Global Credit Fund, Mass Mutual Insurance and CNF Investments.

International Coal Group Inc., an Ashland, Ky.-based coal producer controlled by W.L. Ross & Co., has set its proposed IPO terms to 20 million shares being offered at around $15 per share.

    PE-Backed M&A

Siemens AG has agreed to acquire Garderos Software Innovations GmbH, a Germany-based provider of operational support systems software. No financial terms were disclosed. Garderos has raised VC funding from SAP Ventures, Wellington Partners and Techno Nord VC. www.siemens.com www.garderos.com

    Firm & Fund News

Clarion Capital Partners, a New York-based middle-market private equity firm, has closed its latest funds (Trumpet Investors LP and Trumpet SBIC Partners LP) with $255.8 million in total capital commitments. Approximately one-third of the money already has been committed to four portfolio companies: The Oceanaire Inc., Great Northwest Insurance Co., Strategic Outsourcing Inc. and U.S. Nursing, Corp. Far Hills Group served as Clarion’s fund placement agent. www.clarion-capital.com

WR Hambrecht & Co. is bringing its OpenIPO process to Japan, via a new partnership with Monex Bean Holdings Inc. and ZenShin Capital Partners. www.wrhambrecht.com

    Human Resources

Bill Repko and David Ying have joined Evercore Partners as senior managing directors and co-heads of the firm’s restructuring practice. Repko previously served as chairman and head of the restructuring group at J.P. Morgan Chase & Co., while Ying was managing director of Miller Buckfire Ying. www.evercore.com

Mooreland Partners, a Greenwich, Conn.–based communication and tech-focused I-banking firm, has added Stephen Schweich and Patrick Seely as London-based managing directors. Schweich is the former CEO of Robertson Stephens International Ltd., while Seely was co-head of the media and communications practice of Broadview International, where he also helped set up VC unit Kennet Capital. www.moorelandpartners.com

Bono Helps Elevate New Fund

It has been 15 months and 14 days since news broke that Elevation Partners had added U2 frontman Bono (a.k.a. Paul Hewson) as a managing director/general partner. It also has been 15 months and 14 days since I wrote the following:

It isn’t that I don’t think that Bono has the brains for a [managing director] role, but rather that I don’t think he has the time. U2 is in the midst of recording a new album, and new U2 albums generally are followed by tons of media appearances and an international stadium tour. Is Bono’s plan to perform on Sunday nights, and then attend Monday morning meetings via WebEx? Due diligence while the opening act is on stage? Or while Leno chats it up with The Edge?

I bring this up today because Elevation Partners recently closed its inaugural fund with $1.8 billion in limited partner commitments (above its $1.5b target). Kevin Albert, the former Merrill Lynch fund placement czar who joined Elevation earlier this year, says that the final close occurred in August, following a series of rolling closes that included approximately $900 million raised in 2004 and $900 million raised in 2005. He also says that the media/entertainment/consumer-focused firm likely will announce its first deal iwithin the next few months.

Albert also briefly discussed Bono’s role in the fund-raising process, which he described as a “double-edged sword.” On the one hand, there were many people drawn to the fund because of Bono’s celebrity, but there were others – particularly public pension fund managers – nervous about being perceived as celebrity worshippers. After all, the press would have a field day with: “Bono to invest state’s money” or, even worse “Rock star to collect management fees from public pensioners.” You know, perception becoming reality and all that nastiness.

Rather than slinking away from the challenge, however, Bono became a fund-raising force in his own right, participating in around 80 meetings with potential investors. Many of the meetings were one-on-one, in which his combination of industry knowledge and charm helped secure fund commitments.

Therefore, my sarcasm stands corrected. Bono has yet to help Elevation close a deal, but he has helped it close a fund… and that’s more than I ever expected of him.

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Wanted: High-Growth and Emerging Life
Sciences Companies

Apply today to present at 2005 Mid-Atlantic BIO: The Conference for Industry and Investors, the region’s largest industry and investor-driven bioscience event being held October 26-27 in Washington DC.

Gain invaluable exposure to the East coast’s most prominent business and government leaders in the life sciences space, as your company is showcased as one of the hottest investor opportunities.

Applications close on September 30.

Apply today, www.midatlanticbio.org or 410.560.5855.
 

    Top Three

 

DynCorp International Inc., an Irving, Texas-based provider of aviation maintenance, personal security and law enforcement training solutions, has filed to raise $450 million via an IPO of common stock. It plans to trade on the NYSE under ticker symbol DCP, with CSFB and Goldman Sachs serving as lead under writers. Veritas Capital acquired DynCorp earlier this year in an $850 million buyout from Computer Services Corp. (NYSE: CSC). www.dyncorp.com

Novoste Corp. (Nasdaq: NOVT) has terminated its reverse merger agreement with ONI Medical Systems Inc., a Wilmington, Mass.-based MRI systems maker. The move came after Novoste shareholders failed to approve the issuance of Novoste common shares that would have been necessary to complete the merger. ONI, therefore, will remain private. It has raised around $15 million from such firms as Galen Associates and Sage Hill Partners. www.novoste.com www.onicorp.com

Edwards & Angell LLP and Palmer & Dodge LLP have agreed to merge, creating a law firm with 520 attorneys, nine offices and over 20 practices. The merger is expected to take effect on, or around, November 1, with the resulting firm named Edwards Angell Palmer & Dodge LLP. www.edwardsangell.com www.palmerdodge.com

    VC Deals

 

InTouch Technologies Inc., a Santa Barbara, Calif.-based provider of remote presence technology for healthcare providers, has raised $12.1 million in Series C funding. Galen Partners led the deal, and was joined by Acacia Venture Partners and InvestCare Partners (managed by Beringea). www.intouchhealth.com

Identity Engines Inc., a Mountain View, Calif.-based provider of enterprise network security solutions, has raised $8.7 million in Series A funding from Horizon Ventures and Lightspeed Venture Partners. www.idengines.com

eBots Inc., a San Jose, Calif.-based provider of “lean manufacturing” applications, has raised $4 million in Series A funding, according to a regulatory filing. Backers include Labrador Ventures, Draper Richards and Draper Associates. www.ebotsinc.com

Pharmacy TV Network Inc. of Berkley, Calif. has raised $1.2 million in Series A funding, according to a regulatory filing. Backers include Nueva Ventures and the Saudi Venture Development Authority.

    Buyout Deals

 

Emmis Communications Corp. (Nasdaq: EMMS) has agreed to sell four broadcast television stations to Blackstone Group and SJL Broadcast Group for $259 million. The stations are: KOIN-TV, a CBS affiliate in Portland, Ore.; KHON-TV, a Fox affiliate in Honolulu; KSNW-TV, an NBC affiliate in Wichita, Kan.; and KSNT-TV, an NBC affiliate in Topeka, Kansas. www.emmis.com

Trimaran Capital Partners has agreed to acquire El Pollo Loco, an Irvine, Calif.–based quick-service restaurant chain, from American Securities Capital Partners. No financial terms were disclosed for the deal, which is expected to close next quarter. American Securities Capital Partners originally bought el Pollo Loco from Advantica Restaurant Group in December 1999. www.trimarancapital.com www.elpolloloco.com

CVC Capital reportedly has entered the bidding for Coral Eurobet Ltd., the UK-based bookmaker controlled by Charterhouse Capital Partners. Charterhouse already has been in talks with Gala Casinos, which is owned by Candover, Cinven and Permira. www.coral.co.uk

Parexa Corp. (f.k.a. Monan Inc.), a Santa Clara, Calif.-based provider of optical connectivity products, has raised over $5.35 million in Series A funding led by Crescendo Ventures, according to a regulatory filing. www.parexa.com

    PE-Backed IPOs

Caribou Coffee Company Inc., a Brooklyn Center, Minn.-based operator of 322 gourmet coffeehouses, priced 5.36 million common shares at $14 per share (middle of $13-$15 range), for an IPO take of approximately $75.04 million. It plans to trade on the Nasdaq under ticker symbol CBOU, while Merrill Lynch & Co. and Thomas Weisel Partners served as lead underwriters. Caribou Coffee continues to be controlled by Arcapita. www.caribou-coffee.com

Genomic Health Inc., a Redwood City, Calif.-based provider of genomic-based oncology diagnostics, priced around 5.02 million common shares at $12 per share (low end of $12-$14 range), for an IPO take of approximately $60.2 million. It plans to trade on the Nasdaq under ticker symbol GHDX, while JPMorgan and Lehman Brothers served as lead underwriters. The company had raised approximately $100 million in total VC funding from groups like Kleiner Perkins Caufield & Byers, Versant Ventures, TPG Ventures, Baker Tisch Investments, Integral Capital Partners, Invesco Private Capital, Incyte Corp., J.P. Morgan Fleming, Pfizer and CHL Medical Partners. www.genomichealth.com

Taleo Corp., a San Francisco-based provider of Web-based applications for corporate recruiting, priced 6.7 million common shares at $14 per share (low end of $14-416 range), for a total IPO take of approximately $93.8 million. It plans to trade on the Nasdaq under ticker symbol TLEO, with Citigroup serving as lead underwriter. Taleo had raised nearly $37 million in venture capital funding since its 1999 inception, from firms like Bain Capital Ventures, General Catalyst Partners and Telesystem Ltd. Other significant shareholders (due to acquisitions) include Infinity Capital, EdgeStone Capital, RRE Ventures, Venrock Associates, Wachovia Capital Investments. www.taleo.com

A-Max Technology Ltd., a Hong Kong-based provider of portable digital audio players, has set its proposed IPO terms to 6.5 million American depository shares being offered at between $14.50 and $16.50 per ADS. It plans to trade on the Nasdaq under ticker symbol AMAX, with Merrill Lynch and UBS serving as lead underwriters. A-Max raised $60 million in Series A funding in June from General Atlantic. www.amaxhk.com

Legrand SA, a France-based maker of low-voltage electrical fittings and accessories, plans to float on the public markets in 2006. It currently is controlled by Kohlberg Kravis Roberts & Co. and Wendel Investissement, which led a 3.7 billion euros buyout in late 2002. Other shareholders include West LB, HSBC and Goldman Sachs Capital Partners. www.legrand.fr

Phoqus Group Ltd., a UK-based developer of oral drug delivery solutions, plans a Gbp10 million to Gbp12 million public flotation on London’s AIM at the end of next month. It has raised around Gbp32 million in VC funding from firms like 3i Group, Abingworth Management, Advent Venture Partners and The Wellcome Trust. www.phoqus.com

TransCore Holdings Inc., a Hummelstown, Pa.-based provider of transportation technology services, has withdrawn registration for its proposed $600 million IPO. The move was expected, following TransCore’s acquisition late last year by Roper Industries Inc. (NYSE: ROP). It previously had been controlled by a private equity group led by KRG Capital Partners. www.transcore.com

    PE-Backed M&A

Cordis Corp., a subsidiary of Johnson & Johnson (NYSE: JNJ), has acquired LuMend Inc., a Redwood City, Calif.-based developer of chronic total occlusion devices to treat peripheral vascular disease. No financial terms were disclosed. LuMend has raised over $46 million in total VC funding, including a late 2002 infusion at a post-money valuation of approximately $50 million. Shareholders include ABS Ventures, Morgenthaler Ventures and De Novo Ventures. www.cordis.com www.lumend.com

Simple Star Inc., a San Francisco-based provider of consumer imaging products and services, has agreed to acquire OurPictures Inc., a Palo Alto, Calif.–based provider of photo print and share solutions. No financial terms were disclosed. Simple Star is backed by Venrock Associates. www.simplestar.com www.ourpictures.com

BEA Systems Inc. (Nasdaq: BEAS) has acquired M7 Inc., a Cupertino, Calif.-based provider of Web application development tools. No financial terms were disclosed. M7 has raised $9.5 million in Series A funding from Highland Capital Partners, Redpoint Ventures, Cypress Ventures and Genevest Consulting Group. www.bea.com www.m7.com

    Firm & Fund News

Elevation Partners has closed its inaugural fund with $1.8 billion in limited partners commitments. www.elevationpartners.com

    Human Resources

Lisa Peterson has joined Akin Gump Strauss Hauer & Feld LLP as a partner in its investment funds and private equity practice. She will divide her time between Dallas and Ft. Worth, Texas, and has spent the past 15 years with Kelly, Hart & Hallman. www.akingump.com

GE Commercial Finance Corporate Lending has named Dustin Weinberger as vice president of origination for the Central Region. He most recently served as vice president of strategic marketing for GE Corporate Lending. www.gelending.com

Just Linking Around

Major print deadlines fast approaching, so time for just a few quick links.

*** Merlin Biosciences, a UK-based venture capital firm, has confirmed that it is being investigated by the Serious Fraud Office (SFO). The Times of London broke the news on Saturday, while yesterday’s Guardian provides additional details. Merlin Biosciences says that it is cooperating with the SFO.

*** Jeff Bussgang of IDG Ventures on the Soul of a New Company.

*** If you liked Brad and Jason on Term Sheets, you’re going to love them on Letters of Intent.

*** The NY Times has taken a lot of blogger heat for its new columnist subscription service (TimesSelect), whereby readers must pay to access Friedman, Dowd, et. all. One common theme has been that the the Web holds so much commentary that readers will simply move on to other writers (i.e. Times hurting its own influence). Well, it hasn’t happened yet, according to Technorati. Take a look at the top searches (save for Nickelback and Demi Moore). This was the same way yesterday, except that it also included Bob Hebert. It is clearly true that most NYT columns will be posted for free online by bloggers, but it’s a mistake for bloggers to believe that readers stop wanting to read a columnist just because his/her column is a bit more expensive or harder to find… just like it was a mistake to believe that music aficionados wouldn’t pay for MP3s once the original Napster was shut down.

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Wanted: High-Growth and Emerging Life
Sciences Companies

Apply today to present at 2005 Mid-Atlantic BIO: The Conference for Industry and Investors, the region’s largest industry and investor-driven bioscience event being held October 26-27 in Washington DC.

Gain invaluable exposure to the East coast’s most prominent business and government leaders in the life sciences space, as your company is showcased as one of the hottest investor opportunities.

Applications close on September 30.

Apply today, www.midatlanticbio.org or 410.560.5855.
 

    Top Three

 

Perlecan Pharma Private Ltd., an India-based integrated drug development company, has raised $52.5 million in first-round funding. The tranched deal includes an initial call-down of $26 million, with participants including Citigroup Venture Capital, ICICI Venture Funds Management and Dr. Reddy’s Laboratories Ltd. (NYSE: RDY). Perlecan ultimately will be majority-owned by Dr. Reddy’s, which is providing Perlecan with its first new chemical entities (NCEs). www.drreddys.com

NRG Energy Inc. (NYSE: NRG) is in advanced talks to acquire Houston-based wholesale electric power generation company Texas Genco Inc., according to The Wall Street Journal. The deal would be valued at $5 billion or more (plus more than $2 billion in assumed debt), and would represent an exit for the private equity consortium that acquired Texas Genco last year for $3.65 billion ($900 million in equity). Those firms are KKR, Texas Pacific Group, Blackstone Group and Hellman & Friedman. Texas Genco currently is in registration for a $600 million IPO, with each of the aforementioned private equity firms holding a 24.8% ownership position. www.txgenco.com

Tenaska Capital Management, an affiliate of Tenaska Energy Inc., has closed its Tenaska Power Fund with $838 million in limited partner commitments. The fund will acquire energy and power companies and assets in the United States, and already has acquired two power generation facilities. www.tenaska.com

    VC Deals

 

Modulus Video Inc., a Sunnyvale, Calif.-based provider of MPEG-4 AVC video compression systems, has raised $10 million in Series B funding. Thomas Weisel Venture Partners led the deal, and was joined by return backer Trinity Ventures. www.modulusvideo.com

2BeQ Inc. of Menlo Park, Calif. has raised $2.84 million in Series A funding, according to a regulatory filing. Participants included Mayfield and Vanguard Ventures. Little information is available on the “communications and information services technology” company, except that it was founded by former Vertical Networks Inc. executives Greg Pounds and Tim Kusumi.

July Systems Inc., a Santa