Ladies and gentlemen, thank you for standing by. Welcome to NETSCOUT's conference call for investors. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given out to you at that time. As a reminder, this conference call is being recorded. I will now turn the call over to Andrew Kramer, Vice President of Investor Relations. Please go ahead.
Thank you very much, Felicia, and good morning, everybody. Joining me on this morning's call are the following individuals: Anil Singhal, NETSCOUT's Co-founder, President, and Chief Executive Officer; Jean Bua, NETSCOUT's Senior Vice President and Chief Financial Officer; Michael Szabados, NETSCOUT's Chief Operating Officer; and Jim Lico, Executive Vice President at Danaher. We have included on today's webcast a slide presentation to accompany our commentary. For those listeners who have dialed into the call, and you'd like to view the slide presentation, you can find it by going to our website at www.netscout.com/investors, and then clicking on today's webcast. In terms of an agenda for today's call, Anil will share his perspective on NETSCOUT's proposed acquisition of Danaher's Communications business. Jim Lico of Danaher will offer some commentary as well. In addition, Jean Bua will review certain aspects of the proposed transaction.
After we conclude our prepared remarks, we will take your questions. We have allotted approximately one hour for this call. Before we begin with the prepared remarks, I would like to direct your attention to slide number two. NETSCOUT will file a registration statement on Form S-4 containing a proxy statement and prospectus of NETSCOUT and other documents concerning the proposed acquisition with the Securities and Exchange Commission. Investors are urged to read the proxy statement and prospectus when it becomes available and other relevant documents filed with the SEC because they will contain important information. You can obtain a free copy of the proxy statement and prospectus when it is available and other documents filed by NETSCOUT with the SEC at the SEC's website at www.sec.gov or on our own website at www.netscout.com. You may also contact me directly.
Please note that this communication is not a solicitation of a proxy from any security holder of NETSCOUT. However, NETSCOUT, Danaher, and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from NETSCOUT stockholders in connection with the proposed transaction. Information about NETSCOUT's directors and officers and their beneficial ownership of NETSCOUT's common stock may be found in its definitive proxy statement relating to its 2014 annual meeting of shareholders, filed with the SEC on July 24, 2014. This document can be obtained free of charge from the SEC's website or from our own website. Let's move to slide three. Forward-looking statements during this presentation are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934 and other federal securities laws.
Investors are cautioned that statements in this communication, which are not strictly historical statements. Actual results can differ materially from the forward-looking statements due to known and unknown risks, uncertainties, assumptions, and other factors.
Such factors include the failure to obtain, delays in obtaining, or adverse conditions relating to obtaining shareholder or regulatory approvals, the anticipated tax treatment of the transaction and related transactions, risks relating to any unforeseen changes to or the effects on liabilities, future capital expenditures, revenue, expenses, synergies, indebtedness, financial condition, losses, and future prospects, failure to consummate or delay in consummating the transaction for other reasons, our ability to retain key executives and employees, slowdowns or downturns in economic conditions generally and in the market for advanced network and service assurance solutions specifically, the company's relationships with strategic partners, dependence on broad-based acceptance of the company's network performance management solutions, the presence of competitors with greater financial resources than ours and their strategic response to our products, and the ability of NETSCOUT to successfully integrate the merged assets and the associated technology and achieve operational efficiencies.
For a more detailed description of the risk factors associated with the company, please refer to the company's annual report on Form 10-K for the fiscal year ended March 31, 2014, on file with the Securities and Exchange Commission. NETSCOUT assumes no obligation to update any forward-looking information in this communication or with respect to the announcements described herein. In addition, as noted on this slide, the presentation today includes certain non-GAAP historical revenue and EPS figures. Historical non-GAAP items are reconciled to GAAP results in the appendix of the slides that are being webcast today, and those can also be found on our website at www.netscout.com. Finally, as we announced last week, NETSCOUT plans to report its second quarter fiscal year 2015 financial results for the period ended September 30, 2014, this Thursday, October 16, 2014.
We will hold a conference call that same day, as is our practice, to discuss these results. Accordingly, we will not be commenting explicitly on our upcoming results, and we appreciate your understanding in this matter. Now, with that all said, I will turn the call to Anil.
Thank you, Andy, and good morning, everyone. I am very excited to be speaking with you this morning following our announcement earlier today that we plan to acquire Danaher's Communications business. We believe that this news represents an exceptional opportunity for NETSCOUT to create even more value for our customers, employees, and shareholders. As detailed in our news release, and as we will discuss on this call, the transaction is valued at $2.6 billion based on NETSCOUT's closing price of $41.91 on October 10, 2014. Upon closing, NETSCOUT shareholders will own 40.5% of the combined company, with Danaher shareholders owning the rest. We will cover the transaction details later on the call. Let's start with slide number four, as to what the rationale behind this transaction was and why we think it is a great deal for all stakeholders. There are three key points I want to emphasize.
First is, this creates a best-in-class solution. Upon completion, this transaction will create a premier provider of converged network and application performance management solutions. By bringing these great organizations together, we will be able to provide a more comprehensive and compelling range of solutions to address the needs of our customers in both the enterprise and the service provider markets. It will strengthen our capabilities in network performance analytics and service assurance, and enable us to jumpstart our entry into the cyber intelligence market. It will help us to take further advantage of our efforts to bring our nGeniusONE platform to the marketplace and provide a truly differentiated technology solution that offers a very compelling value proposition. Second key point, we provide complementary customer base and global footprint with this combination.
Adding the Tektronix Communications, Arbor Networks, and parts of Fluke Networks to NETSCOUT brings together complementary customer bases and helps strengthen and broaden the NETSCOUT footprint around the world. It will give us a broader global reach, greater diversity, and a much larger scale upon which we will operate. Not only will we have more customers, but we will have more touchpoints within those customers' IT operations. NETSCOUT will gain important mind share with customers who are looking for a company that has the technology, sales and support resources, and the global distribution channels to address their evolving requirements. Finally, this transaction is very financially compelling as well. In addition to the transaction's strategic merits, we also believe it is financially compelling.
With the addition of these businesses, NETSCOUT will more than triple its revenue base to over $1.2 billion on a non-GAAP basis, against the nearly $400 million that we reported in our most recent fiscal year. We will have an even stronger foundation upon which we will seek to maintain our leadership in multiple markets. There are notable synergies that the transaction provides in terms of our products, target markets, customer bases, geographic footprint, and operational resources. That reinforces our view that it will be accretive to non-GAAP earnings in the first full year of operations. We have proven that we are capable of running our business with minimal capital requirements while still making important investments for the future and generating substantial free cash flow. We expect that these characteristics will strengthen as we move our business forward.
As some of you may know, NETSCOUT completed 30 years of operations last month. As NETSCOUT is celebrating its 30-year anniversary of our founding, we have grown substantially since those early days, both organically and through acquisitions, but we are not resting on our laurels. In fact, we believe our best days are ahead of us. Our target markets are continuing to grow as our customers try to deal with many powerful technology trends. We believe this transaction will better position NETSCOUT to more effectively capitalize on those growth opportunities and become an even more strategic partner to our customers. Moving on to slide five. As we have shared with you in the past, we started a new journey at NETSCOUT called NETSCOUT 3.0 about three years ago.
Our mission with that was to leverage our new technology and expertise, our multi-value years of expertise, to enable enterprise and service providers to get the maximum value for their big investment they are making in the technology area, ranging from virtualization to cloud mobility and the evolving internet. They needed a solution to proactively monitor and manage the inherent complexity associated with that, and we wanted to provide a more cost-effective solution. As a result, over the last three years, we invested over 400 man-years in internal technology development, acquired five small companies, and brought a new product to market called nGeniusONE, based on our patented technology called ASI or Adaptive Session Intelligence.
As you see on slide six, which we have shared with you in the past, this allows IT operations, whether it is in service provider or enterprise and in future security operations, to effectively play offense instead of defense. It converts finger-pointing traditional in IT operation war rooms to really collaboration. It allows IT operations to see the problem proactively before the customer report them. This solution is going to allow us to properly do service triage, both for network issues, service issues, and then we have planned to take it into new directions moving forward. As you will see on slide seven, we have already seen a lot of success with this new strategy. Not only our revenue, but EPS has grown significantly. If you start with FY 2014, which is roughly where we started this strategy, we have significantly grown, almost going beyond $400 million.
As you see, our recent guidance, which we thought of reiterating today, which we will be reporting the results for. We are not going to be spending a lot of time on that because we want the main focus to be today's announcement, but I believe you will be very pleased with the results we will be announcing a few days from today. Our vision with NETSCOUT 3.0 doesn't start with IT operations. As you see on slide eight, our vision is to build a global sensor network based on ASI, similar to the cable news network, which didn't exist several years ago, 20 years ago or so, and now many vendors are in that direction. The goal was to ASI technology to be not only consumed by NETSCOUT solutions and analytics for IT operation, but feed the data to third-party consumers as well.
Two of the big consumers in that area, which is on slide nine, are big data and cybersecurity applications. Today, we see that most of the big data vendors are differentiating their solution based on the quality of analytics alone or the scalability of the solution. As you see, some of the big vendors like IBM, SAP, Oracle, and others in the bottom. With ASI technology injected into the big data warehouse, I believe that they will be able to differentiate themselves further by partnering with NETSCOUT. Customers will get next generation big data analytics solution and as well as cyber analytics solution, which not only have great analytics, but great data behind that which has been missing in the current solution. We feel that these solutions, what we are working on, are the right place at the right time.
If you look at the last decade, there have been massive infrastructure refresh going on, whether you talk about 4G technologies, iPhone, mobility, virtualization, SDN, going from 10 gig to 100 gigs is on the horizon, and voice, cable, and IP convergence. All these things, unfortunately, have not been backed by big vendors in terms of holistic management. Not only NETSCOUT wanted to show leadership in this area, but our customers have been demanding the solution to deal with the complexity rather than simply rely on traditional component management solution and a pure quality data feed, which has good analytics, but there is no good data behind it. We believe good data combined with good analytics is the winning strategy for both our customers and the industry. With these solutions, our solutions with NETSCOUT 3.0, our total addressable market has already increased from roughly $1.5 billion to $5 billion.
With the addition of cyber, BI, big data, cloud, we believe our addressable market very soon will be in the $10 billion range. However, the next challenge was how we can maximize this massive opportunity, which has been created by our new technology, new vision, and new strategy based on NETSCOUT 3.0. Three things which we feel were needed. One was the leadership and staying power and passion for this technology and solving these kinds of problems, which we have done very well over the last two decades. We also needed a compelling technology and value proposition, which I believe we have delivered through 400 man-years of development in nGeniusONE and ASI, as well as few technology acquisitions we have done in the voice and security space.
However, one of the challenges I discovered several months ago in fully maximizing the opportunity is to have better market access in both the enterprise and service provider space, have a broader install base where we can inject ASI technology. We could also use additional capability in adjacent spaces like radio access network optimization, business intelligence, more powerful solution in the packet flow switch area, and obviously, cybersecurity. In addition, we wanted the scale, size, and mindshare to match those of the potential competitors, which, by the way, are the players who are not doing solutions based on good data or based on traffic-based instrumentation. Our competition is less in our traditional space where other people are building solutions based on traffic-based instrumentation, but it is more with bigger players who are using element management systems and embedded instrumentation as the basis for the solution.
All of these companies are multi-billion dollar in sizes or valuation. We needed the scale, size, and mindshare to match all those potential competitors. Today's acquisition accelerates the strategy and vision of NETSCOUT 3.0 and a journey we started three years ago. Danaher Communication business, which has been built into a great franchise over the last 12 years, includes 12 technology companies organized into three business units, Tektronix Communications, Arbor Networks, and Fluke Networks. It has more than $800 million in combined revenue in the latest completed year. It has a track record of organic development complemented by strategic initiatives for all these years. I would now like to turn over the call to Jim Lico. I have known Jim for more than five years. In fact, throughout this period, we have been thinking about what is the best way to combine these businesses.
We learned a lot about each of those companies. That is why we were able to execute this combination and analysis and diligence in a very short time. I will now hand over the call to Jim Lico, EVP of Danaher, who is also responsible for this business. Jim?
Thanks for having me on the call, Anil, and good morning, everyone. Speaking on behalf of everyone at Danaher, we are very excited about the opportunity here to combine our communications business with NETSCOUT's business. As Anil said, today's announcement marks the culmination of a multi-year discussion about how to bring our businesses together. This transaction is powerful and unique opportunity to create a premier global provider of network management tools in a structure that will benefit all of Danaher and NETSCOUT shareholders, customers, and associates.
We believe the combined company will be able to enjoy strong growth, drive further innovation, and serve our customers in unique and more comprehensive ways. Danaher's communications business, which is Tektronix Communications, Arbor Networks, and Fluke Networks, are made up of talented and dedicated teams that have worked hard to drive growth, innovation, and leadership in their respective markets over the years with much success.
Danaher's premier troubleshooting, cybersecurity, and engineering solutions, combined with NETSCOUT's high-performance monitoring technologies, will give customers access to the most expansive suite of best-in-class products in the industry. We are glad that our communications business will be joining forces with such a well-positioned company that shares Danaher's core values, particularly related to customers, people, and innovation. I am excited to join NETSCOUT's board upon closing to work with NETSCOUT's capable team and have a hand in shaping what I believe will be a truly great business in the future. I will turn it back over to Anil.
Thanks, Jim, and thanks for having the confidence in allowing us to combine these two businesses. I will really be counting on Jim's support as we go towards the closing and then to the real work of integrating these two good companies. With that, I will transfer the call over to Jean for a financial overview of the transaction.
Thank you, Anil. I would like to take a moment to walk through an overview of the transaction, which is on slide 15. As detailed in the press release, the transaction is done using a tax-free reverse Morris Trust. Under this transaction, NETSCOUT will issue 62.5 million shares to affect the business combination. Based on NETSCOUT's closing price of $41.91 last Friday, October 10, 2014, the transaction is valued at approximately $2.6 billion. Upon closing, Danaher shareholders will own approximately 59.5%, and NETSCOUT shareholders will own 40.5% of the combined company on a diluted basis with approximately 105 million diluted shares expected to be outstanding. NETSCOUT will acquire the assets of Tektronix Communications, Arbor Networks, and certain assets of Fluke Networks in either a spin-off or split-off of these assets from Danaher.
In terms of corporate governance and management, Anil will remain as CEO and chairman of the board. Upon closing of the transaction, the board of directors will comprise the current NETSCOUT board of directors, and they will be joined by Jim Lico, Danaher's Executive Vice President. Since we are combining these two businesses into a more competitive global solutions provider, we are very happy to have Jim continue his relationship with us and to provide continuing experience on the industry and our customers' needs. Anil's current senior leadership team will also remain in their positions. Our company will be headquartered in Westford, Massachusetts, and we expect to retain a strong presence around the globe where our employees are based. The transaction is subject to approval by NETSCOUT shareholders, regulatory agencies, and other customary closing conditions.
The transaction is expected to close during the calendar year 2015, which is the first half of our FY 2016. Turning to slide 16, as Anil stated, we believe this is a strategic and financially compelling opportunity for NETSCOUT's customers, shareholders, and employees. By combining both companies, we will have the ability to continue providing innovative solutions to our customers as well as providing continued value to our shareholders. As an overview to the financial aspects of the combination, this slide shows the proportional contribution of the two organizations related to business performance on an operating level. Based on last year's performance, the combined company is anticipated to have more than $1.2 billion in revenue on a non-GAAP basis. Following the completion of this acquisition, NETSCOUT will have a more diverse customer base in terms of customer segmentation and geographic concentration.
We anticipate that the revenue mix by customer segmentation would become more weighted towards service provider as a result of the Tektronix Communications and Arbor Networks businesses. In terms of geography, we believe that Danaher's communications business has the greatest percentage of international-based customers. Hence, the combined entity will be closer to one-third of revenue being generated from outside North America versus the current one-quarter generated from NETSCOUT's international customers. While the relative revenue and operating income contribution levels for each company is about a 30/70 percentage split, the relative ownership of the company will be approximately 40% current NETSCOUT shareholders and 60% Danaher shareholders. The combined company is expected to be accretive after its first full year of operation. The combined cost basis of the two entities is approximately $900 million, and we anticipate that synergies will be achieved as both businesses are combined.
The transaction is expected to close during calendar year 2015 within the first half of our FY 2016. At that time, we will update our FY 2016 guidance. As Anil mentioned, we will report our quarterly earnings on Thursday, October 16th. We are very pleased with our results for this second quarter, and we will reaffirm our guidance ranges for the full year for both revenue and EPS. NETSCOUT has maintained a conservative balance sheet with sufficient liquidity. Over the last five years, NETSCOUT has generated over $300 million in free cash flow, and we delivered about $100 million of free cash flow in our last fiscal year. Our capital deployment priorities include investment in product development, either internally or through acquisition, as well as modest shareholder repatriation. Over the past few years, NETSCOUT has acquired five companies through cash transactions totaling about $100 million.
In May of this year, we completed repurchasing four million shares through an existing share repurchase program. Our board approved a new share repurchase plan with the potential to repurchase approximately $100 million worth of shares. The combined entity will give us increased cash flow and liquidity and allow us to continue investing in our product development through either acquisition or internal development as we continue to innovate and bring new solutions to our customers. We will also review our continuing share repurchase program to continuing deliver value to our shareholders. Moving to slide 17, we would like to close our prepared remarks by reiterating why we believe this is such a positive move for NETSCOUT, its customers, shareholders, and employees. For our customers, first, the combined business customer base will benefit from a partner that is well-positioned to help them address both their near-term and longer-term IT management challenges.
More specifically, we will have a broader range of best-in-class solutions that will further benefit from a truly powerful, unified management platform that is powered by proprietary Adaptive Session Intelligence software, or ASI. We will be able to leverage the complementary technologies and strong domain expertise that are added to our company in order to ensure that our value proposition will continue to resonate with customers around the world. We will have a broader range of products that can add value to our customers' IT operations, and we will have the sales, service, and support capabilities to help us fortify the relationships we have built with our customers. As we mentioned at the onset of our remarks, we have a proven track record in integrating the products we gain through acquisitions to add value, address evolving customer requirements, and further differentiate us in the marketplace.
We believe that for our shareholders of both companies should be very pleased by today's proposed acquisition, since it will allow for ownership in a stronger, growth-oriented market leader with a proven track record of creating shareholder value. From a NETSCOUT perspective, as we mentioned earlier, this transaction will allow us to accelerate our growth plans and fulfill our mission. It provides NETSCOUT with the size, scale, and capabilities to support continued growth, and it will be accretive during the first year of combined operation. Hopefully, you have a better understanding of the many powerful benefits that we think are possible as a result of this transaction, which includes notable synergies that would not present themselves otherwise. Finally, the reverse Morris Trust structure that we plan to use for this transaction provides for tax-free participation by both companies and their shareholders.
Finally, for our employees, we are positive that we have employees of NETSCOUT, Tektronix, Arbor, and Fluke who are listening to today's call, and we welcome all of our future associates. Anil will be speaking directly to the NETSCOUT team later today and visiting the Tektronix, Arbor, and Fluke offices over the coming days, weeks, and months with Jim. This transaction represents an exceptional opportunity for all of us at NETSCOUT. We want the teams at Tektronix, Arbor, and Fluke to know that they will be joining a company where their hard work and efforts will directly contribute to our collective success. One of our guiding principles since our earliest days that has helped propel us forward over the years is that employee satisfaction drives customer satisfaction.
We are fortunate to have an experienced and proven team of executives who are committed to making sure we stay true to that principle and in making sure that we manage the integration of our two companies effectively. NETSCOUT has operated within an entrepreneurial mindset since its founding. Danaher has acquired a number of growth-oriented startups during the past several years, so we share a similar mentality. In terms of professional growth and development, we are committed to providing every person at NETSCOUT with the opportunity to take on new challenges and the tools and resources to thrive. By working together, we are confident that we will set and achieve very ambitious goals going forward, which will allow all of us at NETSCOUT to participate in our company's future success. That concludes our prepared remarks today. We are ready to answer any questions at this point.
Felicia, you may open the call to questions at this time.
At this time, if you would like to ask a question, please press star one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Steven Winoker with Bernstein Research.
Thanks, and good morning, and congratulations, all. Just a couple of questions. Anil, maybe starting with you and then Jim. Anil, can you quantify in any way what you are thinking in terms of the synergy opportunity here? Just maybe provide shareholders with what sense you might be thinking about on that front. Jim, could you comment on, and also, what opportunity there is in terms of scale and R&D? Jim, maybe talk about, how far the DBS pathway has been for the communications businesses, how far those guys are, and whether you see a broader opportunity here across NETSCOUT.
Let me take it quickly, and then we will move on to the second person, because we have only half an hour for the Q&A today. First thing is, we are not going to provide any more detail on synergy. I think we said that we are going to provide guidance, our tradition has, as soon as the acquisition is closed. We already sort of provided you guidance by saying it will be over $100 million in revenue, more than $1.2 billion plus in revenue, accretive in the very first year. We have a lot of confidence.
We had another transformational type acquisition six, seven years ago, and we are very comfortable that we can repeat that feat, even though it is at a much larger scale, but it is the same multiple, whether it is delivering value to shareholders or whether retaining the employees in R&D and sales or any other metrics you would use. So right now, we are not in a position to provide the synergy. Just looking at cost synergies, this is not a defensive move. This is an offensive move. We do not have to do it. Both companies were doing quite well, but we could even do better together. So we are not just looking at synergies. We are looking at lot of great things we can do for the customer and shareholders.
I think the best way to describe is there will be enough synergies, in multiple dimensions which allow us to be accretive in the very first year.
Steve, relative to DBS, I think the evolution in these businesses is pretty good, particularly related to some of the growth-oriented DBS tools. The new organization will have access to all of those as well. I know Anil and I have talked that there will be some opportunity to share those opportunities, and I think the organizations will work exceptionally well together in finding new ways to use DBS in a business like this.
Okay, thanks.
Next question, operator.
Your next question comes from the line of Matt Robison with Wunderlich.
Great. Congrats, and thanks for taking my question. I got a couple different things here. One, I like it if you could talk a little bit about how the Danaher businesses you are merging with have been growing, what their service to product mix is, gross margins. Then I think you said, Jean, $900 million in cost synergies, but I might have heard that wrong, if you could comment on that.
Yeah. Let me correct that very quickly, Matt. We said that there is about $900 million in combined operating and cost of goods sold within the two businesses. We believe that we have the opportunity, even though this deal on its first full year without synergy is accretive to our EPS. We believe over the years, as Anil has talked about, we will have revenue and well as cost synergies as we integrate both businesses.
Yeah. I thought that needed a little clarification.
Thank you.
Can you comment a little bit about the mix items I asked about and the growth?
Well, I think we are not going to report at this point on individual growth of the businesses. Like I said, both companies were doing good, and there are little bit ups and down at different times. But both companies were investing and doing good. We do not have the breakout of the growth rate of individual, but as we provide the guidance, we will be talking about the growth rate of the combined operations, and I think people will be impressed. As to your question of product versus service, in this business which we are combining, the service ratio is slightly lower than the product versus the traditional NETSCOUT. So it is in the high 20s versus in the mid-30s for NETSCOUT. So I believe in the combination, it will probably be a 70/30 split, but it is too early to give you details on that.
Well, in the Danaher second quarter presentation, it looked like the test and measurement declined slightly year-over-year in revenue. So maybe you could just elaborate a little bit on how this piece that you are merging with compares to the broader test and measurement business, which is, I guess, about four times the size.
Yeah. Jim, go ahead.
Yeah. The second quarter for this business I think we said was down, and would be that way in the second half as sort of some large scale customer businesses sort of flow through the year. But we anticipate that to improve in 2015. I think that will be part of the future discussion when we combine these businesses at close.
Okay, thanks.
Thanks. Next question, operator.
Your next question comes from the line of Scott Zeller with Needham & Company.
Yes. Hi, can you hear me okay?
Yes.
Yes, Scott.
Great. I wanted to ask, when you look at the combined revenues of the company, you had mentioned roughly $1.2 billion or better. How much of that would you expect to be from the service provider vertical on a combined basis or mixed basis?
As Jean mentioned, the percentage will be because Arbor business, which is the security business, is also bigger in the service provider and enterprise. I think if you just break down at the top line between just two halves, regardless of security or network management or performance management, it is going to be more than 50%. We will provide more specific as we provide guidance, and that time we will be happy to provide more detail. But in the current one, it is less than 50% and in the current NETSCOUT. Jean will weigh a couple of other aspects of this. Go ahead, Jean.
Hi, Scott. Thanks for your question. The acquisition of these business units is great for NETSCOUT across all our vertical markets, both service provider and enterprise, our major vertical markets. As Anil had said, clearly Tektronix Communications is more weighted towards service provider, and Arbor Networks is also known as the market leader within the service provider vertical. They have some very new exciting product set out there and coming out, which will move them into the enterprise and will jumpstart us into our cyber intelligence market. These include, the issues that we have been talking about and looking at addressing, including advanced persistent threat. Fluke Networks, as you know, is a market leader within its enterprise also. It will give us more access to mid-tier enterprise customers.
We are very excited about all of the businesses and how synergistic it will be to our customers as well as allow us new customers. With that said, clearly at this point, they are focused more on service provider. While our service provider vertical has been more like 40% and has been growing over the last few years, we probably anticipate that in the first full year of operation, the service provider vertical probably will go to 50% to maybe 60% of revenue.
Okay, and then just to briefly follow up, I would expect that the overlap amongst service provider customers that you share is quite high, if not close to all of them. When you look at the general enterprise and maybe financials vertical, what would you characterize the presence of Danaher as?
Well, first of all, I think there is overlap in terms of names of the customer. We are bigger in certain areas. Danaher has been bigger and Tektronix has been bigger in other areas. In places where they are buying both products, they are buying it for two very different reasons. Our product is mostly bought for monitoring and Tektronix Communications product is mostly bought for troubleshooting. I think that is going to be continuing the case and customer will get more than one plus one for the price of two. That will continue in terms of enterprise. We are at the higher end of the market, more focused in the U.S., where Fluke Networks is more mid-tier and much bigger share international, which is going to be great story.
And obviously in the cyber, as you know, at the analyst day, we announced our strategy to enter the cyber area towards the end of this fiscal year. With Arbor, we will be able to jumpstart and inject some additional technology to an already successful security business.
Thank you.
Next question, operator.
Your next question comes from line of Kevin Liu with B. Riley & Co.
Hi, good morning. I think you started to address, Anil, but just wanted to get more specifics around the number of shared customers that you guys might have and whether there are actually any products within the portfolio that overlap directly.
I think there will be some overlap, but I think it is minimal and during diligence we found that it is even smart. As you know, Jim and I have been talking about combining these businesses, or as maybe you didn't know, but for more than five years. We had some good ideas and, obviously when independent companies are there will be some overlap. But I think it is minimal and we will be able to manage through that. I think most importantly is that customers are going to be very happy to hear that even the little overlap we have is going to be really sorted out in terms of better integration capability and best of both worlds.
A quick question. It sounds like the ASI technology, you're looking to get that embedded in as many spots as possible. Will you guys be able to get the technology integrated with the Danaher assets in advance of actually formalizing the merger?
No, because we have to operate as a separate company, but I can assure you that within the first year of closing it will be closely integrated.
Okay. Thank you.
Next question, operator.
Your next question comes from line of Mark Kelleher with D.A. Davidson.
Okay, great. Thanks for taking the question. It looks like you are closing sometime next summer. Can you just run through some of the gating items to get to that close? Are you concerned about any antitrust issues?
Hi, Mark, this is Jean. Clearly we have to go through the SEC registration process. Danaher will do a Form 10 for the entity that is being either split off or spun off to its shareholders. NETSCOUT will have a proxy and S4 statement that we will file. We anticipate that we will file that before the end of this calendar year. At the same time, we will go through antitrust and competition issues. We do not anticipate at this point since these businesses are very complementary to each other and that as you have heard Anil's mission and goal, we are really striving to become a global player where we have much larger competitors with multi-billion dollar market cap. At this point, we are not anticipating issues there. Then we just will work out some of the details related to the tax structure.
You are correct, we anticipate it will close sometime in calendar year 2015, probably around the second quarter of our FY 2016 fiscal year.
Who would you envision with the combined company that you would now be competing against? Who are those larger competitors that you would go up against?
Well, this is a longer discussion, and we will be talking a lot to you about it at the next analyst day and other discussion about the bigger competitors are. There are two approaches to security, performance, network management. One is based on mining the intelligence already in the network or embedded in elements. We call it component based. Think the Splunk and CA and IBM and HP to certain extent, and host of close to 50 other companies, many of them, or a large number of them, with multi-billion dollar valuation or multi-billion dollar revenue already. Those are the people we will be competing with because our approach is different. Our mission may be similar, but our approach is different. Our approach is different in the sense that we do not use data mined from elements.
We mine the intelligence from the traffic, from the packets, and that always has been the vision of the company for the last 30 years. I think because of the innovations happening in the marketplace and the complexity introduced, that will even become more compelling. But to make it more compelling, you not only have to have a bigger TAM or great technology and vision, you need to have the scale and size. Those are the people we will be competing with, all the big players, which is not competing with other smaller players who do it based on the traffic approach.
Okay, thanks.
Yes.
Your next question comes from the line of Mark Sue with RBC Capital Markets.
Thank you. Good morning. I understand the process involved in integrating the assets. Perhaps how you would think about integrating the technology. Do we see a day in the future where we are combining and integrating the nGeniusONE assets throughout the product portfolio, or do we strive to keep the brand equity in terms of the disparate assets? Just how the end customer would perceive some of your broad range of expanding solutions.
I think brand equity is a different issue. Obviously, we'll maintain the nGenius brand. But beyond that, right now, we are basically a software company. With virtualization and what's happening in the marketplace, it's very easy to integrate software technologies on those platforms because most of it is Intel-based appliances with Linux operating system. In those environment, we think we'll be able to put ASI technology or metadata into devices which Arbor and Tektronix Communications and Fluke has been using, and vice versa. We will be able to put those metadata and other analytics type things injected into the NETSCOUT product line. I think there'll be not only cross-selling opportunity, but very good integration possibilities.
Like I keep reminding everyone, we did something similar at a smaller scale six years ago when we acquired Network General, and today nobody can tell that it was actually two separate companies six years ago. I believe in a couple of years, that'll be the situation here also.
Okay, that's helpful. Thank you. Good luck.
Okay. Thank you.
Your next question comes from the line of Alex Kurtz with Sterne Agee.
Yeah, guys. Thanks for taking the question here. Jean, I just wanted to clarify a couple of things. With the business that you are acquiring, is the product mix and services mix basically similar to what you guys have with NETSCOUT? Obviously, you are going to write off some of that services business. Can you just give us a sense of how we should think about looking at that model as we look at the first year of combined operation?
Sure. As you know, the service mix for NETSCOUT is about 45% service, and that is clearly due to our business model, our pricing model, and the long-term loyalty that we have achieved over these years with our customers. Danaher also, the businesses that we are buying, has tremendous customer loyalty. Their pricing models are slightly different, so their service revenue component is a little lower than the way we do. As we combine these businesses and we put the guidance together going forward after the close, the product service mix will probably be a little less than 45%, but we can give you a better handle on that as we file the S4 before the end of the calendar year also.
Is there any change to the effective non-GAAP tax rate once this deal closes?
Well, interestingly, Danaher has set up structures that would allow us to become more tax efficient over time. As we look at these businesses after the close, we will have the opportunity to look at our tax rate and to determine whether there is any synergies there that we can take advantage of.
But just suffice to say, you should be below your 38% rate once this closes.
Well, I will know that as soon as the thing closes and we look at the integration and we give guidance when we update it after the close.
Okay. Anil, just the last question for me. It was asked earlier. I think it's a reasonable question to understand. Obviously, your service provider business has been very strong over the last couple of years here. Is Danaher's business growing mid-teens in that vertical? This is obviously an important question for investors to understand here as we try to value the transaction. Is this a mid-teen service provider business that you're acquiring today?
Well, I think I can talk about. I am not going to talk about things which we know internally as part of diligence and which are not disclosed by Danaher. I can tell you that a combined service provider business can grow at that level over time, and I see enough synergies and positives on both things for us. We look at the total business. A combined business will grow faster than the way it is growing in Danaher, but we do not want to split it at this call how individual three businesses like Arbor and Tektronix and all those. Also, these businesses are very lumpy, and just looking at even over a six-month period is not fair. Because of all those reasons, I think we may be missing the key point here by looking at that low level.
I know you are interested in that, but at this point, we will not be able to talk about it.
Okay. Thank you, guys.
Yes.
Operator, if you could remind people if they have questions how to ask.
Again, if you would like to ask a question, please press star one on your telephone keypad. Your next question comes from the line of Rob Christopher with Goldman Sachs.
My question was just answered. Thank you, though.
Thank you. Okay, looks like there are no other questions. Thanks all of you for joining us for this exciting event in the next growth phase of NETSCOUT. We will talk to you again and take more questions during our earnings call on Thursday morning. Thanks again.
Thank you. This does conclude today's conference call. You may now disconnect.