Casa scores landmark 5G core deal and equity investment from Verizon

  • Verizon has awarded Casa Systems a multi-year, $100m+ 5G core systems deal
  • The operator is also investing about $40 million in Casa’s stock
  • The news sent Casa’s share price soaring
  • And the vendor says it has more 5G core deals to announce 

Major US operator Verizon has selected 5G core technology from Andover, Mass.-based Casa Systems to support its mobile edge computing (MEC) strategy, awarding the company a contract that could be worth up to $140 million during the next few years, and has also given the vendor a corporate seal of approval by investing $40 million in return for a 9.9% equity stake. 

The news of the multi-year deal and investment sent Casa’s share price soaring by more than 80% to $7.10 on Monday, though it has dropped back to $6.34 in early Tuesday trading. Verizon secured its tranche of the company on 14 April at $4.24 per share (at which point the shares were trading for less than $4.00, so Verizon paid a premium). The operator does not get a board seat or any special investor privileges as a result of its investment.

The move by Verizon is a major validation of Casa’s portfolio strategy, R&D capabilities and potential provider of next generation, cloud native 5G core functionality to the telco community.

“Casa Systems is an important member of our 5G and MEC ecosystem, providing flexible applications that will allow us to scale up for our customers as real-time solutions continue to grow,” stated Kyle Malady, President, Global Networks and Technology at Verizon. “We have confidence in Casa as a cloud-native technology partner and look forward to joint innovation as we scale the power of 5G and MEC in the years to come." 

Casa, which has been diversifying from its traditional cable network technology portfolio in recent years, generated revenues of $401.3 million and an operating profit of $18.3 million in 2021, so this deal is significant from a financial as well as market validation perspective. Verizon will pay Casa $20 million this year to help with the vendor’s R&D and product readiness processes, with a potential $120 million of business to follow starting next year if Casa hits its deadlines and meets Verizon’s expectations (so the business is not guaranteed, but firmly in the pipeline and is essentially Casa’s to lose).

And it gives the vendor a great launchpad for further business, as the deal will position it as a key contender to rivals such as Cisco, Ericsson, HPE, Huawei, Microsoft Azure (Affirmed), Nokia and Oracle as further 5G core decisions are considered and made. 

On a special webcast about the deal on Monday, Jerry Guo, Casa’s President and CEO, made the most of the opportunity to position the Verizon engagement as a gamechanger for the industry as well as his company.

“Verizon has an incredible legacy of being one of the world's leading providers of technology and communications services, and we're honoured to have them as a strategic partner as our business continues to grow. This announcement is an important milestone for our wireless programmes and... represents a strong validation of our industry leadership in cloud native wireless operator technology,” noted Guo. “Verizon is an acknowledged industry leader in driving innovation in the mobile wireless industry, with consistent world firsts over many years, announcing new technologies and associated vendors to the market,” he continued, adding that the deal “represents a strong justification of our cloud native design investment we have made over the past few years. This award places Casa at the forefront of the global industry shift towards edge-deployed, cloud native software-controlled telecommunications networks. We expect that Verizon’s endorsement... will help unlock new business with other large scale service providers around the world who are right now planning their own shift to a cloud native network architecture.”

Guo added that the “cloud native 5G core contract announcement is a strong indicator of the direction the wireless industry is taking towards their 5G networks. While we have seen many Tier 1 mobile operators announce and deploy 5G networks over the past few years, the vast majority of these networks are based on traditional chassis or virtual network functions, which is not the way of the future. The Casa cloud native solution can be used to complement or replace the legacy 5G core because of the scalability, speed of deployment and network changes, and built-in high availability.”

The MEC solution announced today “is deployed at the edge, or the far edge, of the network, with thousands of locations,” unlike most current 5G core deployments that are deployed in a small number of major data centre locations, noted Guo. “The edge or far edge deployment architecture offers significantly lower latency to enable real time applications, which is one of the key 5G advantages. Existing 5G deployments today are mostly non standalone: Casa supports multiple network deployment modes, including standalone, non-standalone and 4G in control and user-plane separation mode... We believe the 5G and 4G cloud native core addressable market is wide open today. And with this award we are positioned extremely well. As we speak, Casa is performing technology trials and working on deals involving multiple 5G core cloud native opportunities worldwide. These are deals of significance, and we will continue to improve the market as we look to announce more positive news throughout the year,” added the CEO.

Guo went on to note that Casa has other deals not yet announced and additional business with Verizon that it hasn’t yet shared.

Casa has been involved in 5G core tests and trials with other major operators in recent years, but hasn’t always made the cut: For example, in February, following extensive trials, Orange left Casa and HPE out in the cold when it opted for Ericsson and Nokia as its 5G standalone core technology suppliers. 

- Ray Le Maistre, Editorial Director, TelecomTV

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