Ottawa-headquartered telecom network equipment maker DragonWave is purchasing Nokia Siemens Networks’ (NSN) microwave technology business – more than doubling DragonWave’s staff and boosting its sales by over 400%.

The deal is worth up to 110 million euros. As a consequence, DragonWave, which specialises in microwave technology that moves data between cellular towers and telecom networks, will become the key microwave technology supplier for Nokia Siemens.

DragonWave will pay 10 million euros in cash and 5 million in its stock. It will also assume employee liabilities of about 10 million and about 5 million for a capital asset lease.

Under the deal, approximately 360 Nokia Siemens Networks employees to will be transferred to DragonWave, more than doubling its staff of 270. Most of these employees are based in Milan and Shanghai.

Because the deal includes an 18-month earn-out period based on sales, if DragonWave reaches its quarterly revenue target of $100 million it could trigger further cash payments of 80 million euros. In an analyst call, Dragonwave executives said the deal could boost sales by four to five times.

Still, Dragonwave is facing some challenges: the company’s June-August sales dropped to $13.6 million, and spending cutbacks from Clearwire, a major U.S. customer, resulted in a fourth straight quarterly loss. That said, DragonWave has decent gross margins of about 30%, and can hit a profit margin of 10% on volume sales.  To get there, however, it needs to hit $100 million in quarterly revenues.

Under the deal, DragonWave will now develop and manufacture NSN’s microwave solutions, with NSN still playing a marketing and sales role. Completion of the acquisition and the supply agreements is expected in the first quarter of 2012.