After failing to obtain more working capital, DZS has applied for bankruptcy protection and will initiate liquidation procedures.
DZS, a broadband equipment and cloud services company, has undergone a series of acquisitions and divestments in recent years and has now ceased all operations in the United States. However, the company’s overseas subsidiaries may continue to exist outside of liquidation in the United States.
The company announced on Friday (March 14th): “We are very disappointed to find that DZS is unable to obtain the necessary working capital from current or any potential lenders to sustain the development of its business. According to the asset liquidation procedure under Chapter 7 of the Bankruptcy Law, the company wishes to acquire its market leading broadband access, connectivity, and cloud software solutions, and restore business to customers and suppliers.”
DZS stated that at the time of submitting the application, all US operations had ceased and all US employees had been dismissed. However, the company explained that its overseas subsidiaries in Germany, the UK, and Australia “may continue to exist outside of the US liquidation”.
But the future path of these subsidiaries may be somewhat bumpy in the short term. DZS stated, “The daily operations of subsidiaries and affiliates outside the United States will experience business interruptions in the short term, which will include various IT (i.e. Outlook/email) and other software programs.”
Chapter 7 of the Bankruptcy Code will soon appoint a trustee to manage the liquidation proceedings in the United States and assess how to handle foreign subsidiaries and affiliates. The company stated that employees, creditors, customers, and other stakeholders will receive bankruptcy filing notices from the Eastern District Bankruptcy Court in Texas, USA.
DZS explained in its filing with the U.S. Securities and Exchange Commission that “after bankruptcy proceedings, holders of the company’s common stock are unlikely to receive any payments or other distributions.”
DZS seeks alternative solutions
About 10 days ago, DZS disclosed that due to financial constraints, the company is seeking strategic alternatives, including raising more financing, selling assets, or filing for bankruptcy protection. About 18 months ago, DZS attempted to alleviate some financial pressure by obtaining $29.7 million in financing, including a $24.5 million three-year loan to Dasan Networks, which held a 29% stake in DZS at the time.
Chapter 7 marks the unfortunate end of DZS, which was renamed from Dasan Zhou to DZS under the leadership of telecommunications veteran Charlie Vogt, who took over the company in August 2020. Like many peers, DZS was forced to cope with a period of declining sales as operators digested inventory during the early stages of the COVID-19 pandemic. In this situation, the acquisition of components is hindered due to supply chain limitations.

DZS was also forced to restate some of its revenue related to certain clients in recent years. This process will be completed in 2024.
DZS is also one of many suppliers, hoping to gain momentum from the constantly evolving Broadband Equity Access and Deployment (BEAD) program. However, the uncertainty and changes in the plan have changed people’s expectations, leading some suppliers to abandon BEAD from their financial plans for 2025.
Withdrawal following the wave of mergers and acquisitions
Vogt has served as an executive at ATX Networks, Imagine Communications, and Genband. Under Vogt’s leadership, DZS has completed several acquisitions with the aim of expanding the company’s investment portfolio, diversifying its core business, and exploring adjacent markets, including a greater focus on network software. These transactions include Optelian (optical technology and products), Rift (cloud native virtualization and orchestration software), Assia (Wi Fi management software), and Casa Systems’ NetComm Fixed Wireless Access (FWA) business. NetComm, headquartered in Australia, is not within the scope of filing for bankruptcy protection under Chapter 7 of the US Bankruptcy Code, but it is part of a business under evaluation.
Recently, DZS has been selling some of its businesses as it wants to focus more on its core business – networking, connectivity, and cloud edge software.
Last November, DZS sold its IoT business to Lantronix for $6.5 million, and a 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 Asian business to Dasan Networks for $48 million, as DZS focused more on regions such as the Americas, Europe, Middle East, Africa, and Australia.
In November, DZS announced that its revenue for the third quarter of 2024 was $38.1 million, a 23% increase from the previous quarter and a 67.8% increase from the same period last year. At the end of this period, DZS had operating capital of $24 million, backlog of orders of $90 million, and inventory value of $79 million.
At that time, DZS was cautiously optimistic that the company was on the road to recovery.
Vogt said at the time, “With our restatement, sales of our portfolio of network protection and home WiFi management products have come to an end. We are optimistic about the growing sales channels and strong backlog, and we believe our good days are ahead.”