Ericsson pays $1.15B for Telcordia in all-cash deal

L.M. Ericsson (ERIC) announced it plans to acquire privately held Telcordia for $1.15 billion in an all-cash transaction, strengthening Ericsson’s portfolio of operations support systems/business support systems. Telcordia’s 2,600 employees are expected to become Ericsson employees when the transaction closes sometime in the fourth quarter.
Telcordia has had a strong presence as a legacy OSS provider to the regional Bell operating companies, but has been trying to move beyond that role, partnering with third parties to offer hosted managing solutions, service delivery, real-time charging, as well as software integration and network efficiency to service providers, enterprises and governments. In 2005, the company noted that more than 50% of its sales came from non-RBOCs. As service providers open up their networks to allow content providers to access their networks, Telcordia’s solution can track billing, fulfillment and other exchanges taking place between the service provider and third parties.
Telcordia, once a part of Science Applications International Corp., was sold to private-equity firms Providence Equity Partners L.L.C. and Warburg Pincus in 2005 for $1.3 billion. The Piscataway, N.J., company generated revenues of $739 million in its fiscal year, which ended Jan. 31, 2011.
“The importance of operations and business support systems will continue to grow as more and more devices are connected, services become mobile and new business models for mobile broadband are introduced,” said Ericsson President and CEO Hans Vestberg. “ In this context, Telcordia brings very skilled people and knowledge, a large business in North America and other markets, as well as a good multi-vendor product portfolio.”
The deal gives Ericsson even more scale, Vestberg said, which is important as the world moves to a place where everything that can be connected to the network will be connected. “OSS and BSS are critical areas to handle this challenge and to simplify the processes that support the business. They drive the customer experience and serve as the engine to monetizing traffic, offerings and products that operators sell. All in all, these systems are crucial to create the experience users expect in a cost efficient manner,” Ericsson said in a press statement announcing the merger.
Ericsson has been buying strategic assets in the last few years, picking up Nortel Networks Ltd.’s assets in 2009 and 2010 and buying Telenor Group’s M2M platform in April.