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Ericsson completes its acquisition of Telcordia Technologies

The deal presents significant cross-selling opportunities, but Telcordia's competitors will take advantage of the integration challenges that the two companies face in the coming year.

Ericsson announced that it completed its acquisition of Telcordia Technologies on 11 January 2012, and provided an update briefing on 18 January. Telcordia will be a sub-unit within Ericsson's Business Unit Multimedia under Mark Greenquist, who will report to Per Borgklint. Telcordia's ATS unit, which focuses on work for the US government, will be a separate legal entity. A lot of the focus is on integrating Telcordia into Ericsson's branding. So far, the two companies have not announced any significant product-related impacts from merging the businesses.

When the acquisition was first announced, we published a Comment that communicates the essential issues surrounding the deal. Following the briefing from Ericsson, we add this additional comment.

Benefits and opportunities

  • There is little overlap between the two companies' portfolios. Where overlap does exist – in the real-time charging domain – the use cases differ, which will minimise confusion in the sales process.
  • Ericsson has become an important LTE supplier to AT&T Wireless, MetroPCS Wireless, Verizon Wireless and other mobile operators. Telcordia has long-standing relationships with the RBOCs in the USA. This should create some opportunities to cross-sell Ericsson's software portfolio into accounts where Telcordia can use these relationships.

Risks and uncertainties

  • The culture of each organisation is different. Telcordia is more research-oriented and Ericsson is more commercially oriented. Ericsson must infuse its culture into its new acquisition, which will create turmoil within Telcordia.
  • If Telcordia does not maintain some independence within Ericsson, its ability to provide multi-vendor support will diminish.
  • Telcordia's competitors will take advantage of the integration challenges that the two companies will face during the coming year, which could result in revenue declines and losses in market share.

 

Key aspects of this acquisition were covered in our Comment in July 2011

Ericsson announced on 14 June 2011 that it planned to acquire Telcordia for USD1.15 billion in cash. Ericsson is placing a big bet in the hope that it can significantly expand its ability to provide software and services to telecoms operators by acquiring a company with a strong portfolio of multi-vendor operations support systems (OSS) products and establish a strong position in North America. This is a significant consolidation of the OSS market, which is increasingly focusing on major integrated suppliers at the expense of independents. It can provide strong differentiation for Ericsson as an end-to-end supplier of business support system (BSS)/OSS technology and services to communications service providers (CSPs), but risks failure due to well-known issues that have destroyed similar deals.

We have three major observations about this deal:

  • The combination of Ericsson's existing OSS and BSS products, global scale and strong services, and Telcordia's multi-vendor product portfolio and service fulfilment strengths, puts Ericsson in a unique position as an end-to-end OSS/BSS supplier for new service deployments and OSS/BSS transformation.
  • This combination is a mixed blessing for CSPs. For those looking for a total solution provider, it makes Ericsson more attractive than ever as a supplier. For those looking for OSS solutions not tied to a major equipment or IT vendor, it eliminates one of the few major independents left.
  • The acquisition has significant risks for Ericsson. The biggest risk is that it will lose the benefit of the multi-vendor product portfolio that Telcordia brings. Virtually all of Telcordia's OSS business is tied to multi-vendor deployments. If CSPs regard Ericsson as unreliable in multi-vendor support, Ericsson will lose almost all the expected benefit of the acquisition and allow its competitors to recover from the threat of Ericsson as end-to-end supplier.
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