DZS gets a lifeline

　　Chapter 7 might not be the end of the story for DZS, the optical and cloud tech company that recently shut down its US operations.

　　Canada-based MNSi (Managed Network Services Inc.) announced Tuesday that it has signed a letter of intent to acquire the assets of multiple DZS units, including DZS Inc., DZS Services and DZS California, and establish a new US-based company to be called Zhone. Financial terms were not announced.

　　DZS was known as Dasan Zhone Systems before it was rebranded as DZS in 2020 under CEO charlie Vogt. Dasan Networks and Zhone merged back in 2016.

　　MNSi, a broadband, video and voice services operator focused on Windsor, Ontario, and the surrounding areas, said it has been a Zhone customer since 2001. MNSi said its plan is pending in a bankruptcy case pending in the US Bankruptcy Court for the Eastern District of Texas. A hearing on the matter is scheduled for April 28.

　　If it all goes to plan, MNSi intends to headquarter Zhone in Plano, Texas, and continue on with DZS's product line of optical line terminals, optical transport systems, gateways, access points and DZS's cloud platform and products.

　　Plan to restore customer support, reach out to DZS employees

　　"The new Zhone's mission over the first 30-90 days will be to restore customer support and fulfill its committed backlog to its valuable customers and channel partners," said MNSi, which has a fiber buildout project of its own underway. MNSI's current top fiber services tier for residential customers tops out at 1 Gbit/s down by 750 Mbit/s upstream.

　　Restoring support rapidly is critical to DZS's customers. As Teresa Mastrangelo, a former industry analyst and current senior competitive strategy manager at Calix, explained in her analysis of DZS's history and why the company ended up in Chapter 7 on the Broadbandtrends blog, DZS's customers were effectively "hung out to dry" without software and hardware updates. That lack of support also left their networks "vulnerable to attacks – especially in an era where this is far more common than a decade ago," she added.

　　DZS employees caught up in the Chapter 7 filing might also get a welcome reprieve. MNSi noted that it "will also seek to engage many of the current and former employees" of DZS. Additionally, MNSi said it might also try to acquire three units – DZS International, DZS Canada and DZS India – that are not in bankruptcy.

　　"We aim to accelerate the rehiring, on-boarding and reestablishment of renewed partnerships with third-party development, silicon chip technology, IT systems, manufacturing and global channel partners as a number one priority," Clayton Zekelman, founder and CEO of MNSi, said in a statement. "As the broadband access industry begins to normalize after recent challenges with supply chain driven excess inventory and as numerous broadband government-led stimulus programs begin to emerge, the new Zhone will reemerge as a financially stable technology challenger across the FTTx and cloud software market."

　　New chapter for DZS?

　　The MNSi proposal arrives a few weeks after DZS filed for Chapter 7 and shut down its US operations after failing to secure more capital. At the time, DZS remained hopeful that its assets would be acquired and its work with customers and suppliers would be restored.

　　DZS's foreign subsidiaries, including those in Germany, the UK and Australia, have continued to operate outside of the Chapter 7 proceeding. For example, Australia-based NetComm, a supplier of fixed wireless access (FWA) products that DZS scooped up in 2024, is not linked to the DZS US Chapter 7 filing.

　　Prior to the Chapter 7 filing, DZS had sought strategic alternatives, including the raise of more financing, the sale of assets or a Chapter 11 bankruptcy filing.

　　DZS, like many of its peers, navigated a period of sales declines as operators worked through inventories stocked up during the early parts of the COVID-19 pandemic. The situation was worsened by supply chain constraints. DZS also was forced to restate some revenues in recent years linked to certain customers. That process was completed in 2024.

　　DZS has shed some assets of late as it looked to put more focus on its core business of networking, connectivity and cloud edge software. Last November, DZS sold its IoT business to Lantronix for $6.5 million, and the month before that it sold its Wi-Fi management and service assurance business to Axon (formerly known as Greenwave Systems) for $34 million. In April 2024, DZS sold its Asia business to Dasan Networks for $48 million amid DZS's greater focus on regions such as the Americas, Europe, middle East, Africa and Australia.

　　Editor's note: The story has been updated to reflect that Teresa Mastrangelo is a former industry analyst who is now with Calix.