Transmode Systems and Lumentis, optical equipment vendors based in Stockholm, Sweden, have agreed to merge in an all-stock transaction, the companies announced today. The combined entity will retain Transmode's name.

The two companies believe they complement each other well, since Transmode has focused heavily on coarse wavelength-division multiplexing (CWDM) technology while Lumentis has focused on dense WDM (DWDM). Transmode expects to integrate Lumentis' M3000 DWDM platform into its micro-multiservice provisioning platform (MSPP) for edge aggregation, the Service Extender.

The combined company will have more than 100 enterprise and service provider customers worldwide. Lumentis' customer base includes 1 U.S. customer so far, and Transmode has a small handful of customers in the U.S., including Savvis and Stealth Communications. But Transmode has signed an agreement with a large, unnamed original equipment manufacturer to exclusively distribute Transmode's Extender micro-MSPP for six months.

Both companies expect revenue for the combined entity to double this year. Transmode reported about $11 million in revenue last year, while Lumentis reported nearly $6 million, Transmode said. Transmode closed a $15-million financing round in December 2004 and Lumentis raised $9 million in June 2004, giving the two companies a combined total investment of $81 million.

Transmode employs 60 people, and Lumentis employs slightly more than 40.