Ericsson is paying $1.15 billion to acquire Telcordia Technologies Inc in a debt free, cash-only deal. Formerly known as BellCore or Bell Communications Research, Telcordia has been up for sale for some time by it’s financial industry owners- Providence Equity Partners LLC and Warburg Pincus LLC. Please refer to this article for background information: Telcordia Is Up for Sale- who will bid for the company?
Telcordia Technologies offers support systems, network software and consulting services. The private company had sales of $739 million in the 12 months ended Jan. 31, according to a statement. They have over 800 customers in 55 countries, and hold around 1,800 issued patents. Telcordia is particularly well known for its expertise in mobile, broadband and enterprise software and the OSS/BSS side of the business. For years, they’ve talked up netx generation OSS for cellular and other carriers.
“Operators don’t want to change their networks but they want to have them evolve, and software and services are key for that,” said Jean-Michel Salvador, an analyst at Alphavalue in Paris. “This is a way to buy people who know a lot about network evolution,” he said, adding that the price “wasn’t very expensive.”
“Telcordia has a good position with fixed operators and Ericsson is strong in mobile and other domains of the network so together we can create a strong position,” Jan Frykhammar, Ericsson’s chief financial officer, said in a telephone interview today.
Ericsson said the two companies products are complementary and they have different strengths in OSS/BSS. Telcordia can claim top spot in service fulfillment, charging and billing, while Ericsson leads in revenue management and network optimization.
With the Telcordia acquisition, Ericsson will compete with major software and integration companies like Amdocs and Oracle. Yet Ericsson will have a huge advantage- they are the leading vendor of wireless/ cellular infrastructure gear for many global mobile operators. With Telcordia, they will now be in a position to supply hardware, OSS/BSS software, systems integration and operations management services. In an environment where carriers are merging (e.g. ATT and T-Mobile) or setting up joint purchasing ventures (e.g. FT and DT) to cut costs, the economies of scale may give the combined company a competitive edge. In fact, the Ericsson-Telcordia combo will likely produce more revenue and income than if they were separate entitities.
Author’s Note: with fierce competition from Huawei/ZTE, traditional network equipment vendors can’t make money selling ONLY hardware. Network infrastructure gear makers must move into software, systems integration, network management/operations support systems, consulting or even running carriers’ networks to make a decent profit. Ericsson is already managing all aspects of Sprint’s network. We think the Telcordia acquisition will give them additional leverage in the telco market.