Ericsson snaps up Telcordia for $1.2b

Dylan Bushell-Embling
15 Jun 2011
00:00

Ericsson will pay $1.15 billion to acquire OSS/BSS vendor Telcordia, in a deal expected to bolster its North American presence.

The purchase, which is scheduled to close in Q4, should be earnings per share accretive within 12 months, Ericsson revealed.

Ericsson said it would take on Telcordia's roughly 2,600 staff, as it seeks to carve out a larger share of the OSS/BSS market it estimates was worth $35 billion in 2010.

Telcordia generated revenue of $739 million for the year ending in January.

Analysts are warm on the potential for the merger. Informa Telecoms and Media senior analyst Peter Dykes said the deal will substantially increase Ericsson's footprint in North America.

But he said it was too early to tell what impact a merger could have on the overall OSS/BSS market. “The fact that Telcordia was largely US-focussed might go against Ericsson when trying to sell its wares in the rest of the world, as buying habits are notoriously difficult to change,” he said.

ABI Research principal wireless analyst Jim Eller also expects the merger to “support Ericsson's expansion into wireline - not for wireline’s sake, but primarily as the wireline portion of mobile networks. ”

Both Eller and Dykes commented that the deal was indicative of Ericsson's shifting priorities towards managed services, as a result of shrinking infrastructure margins and pricing pressures from vendors from the far East, particularly China.

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