Media, entertainment, and telecom systems vendor Thomson (NYSE: TMS; Euronext Paris: 18453) expanded its presence in the telecom infrastructure market today by acquiring French softswitch vendor Cirpack.

Thomson didn't reveal financial details, but it has corporate "acquisition criteria" that set acquisition prices at between one and one-and-a-half times the annual revenues of the company it is buying. With Cirpack generating 2004 revenues of about €15 million (US$19.6 million), giving it the leading position in the EMEA softswitch market according to Infonetics Research Inc., that puts the likely price at between €15 million and €23 million, or $20 million to $30 million (see Cirpack Claims Softswitch Leadership).

That's a good price for a softswitch company with very good technology, says Heavy Reading analyst at large, Graham Beniston, author of several reports on the softswitch and media gateway market (see Heavy Reading Reports on VOIP and The Softswitch Name Game).

"Cirpack has well differentiated hardware with its use of IBM Corp.'s eServer BladeCenter hardware. This chassis-mounted server technology is a good compromise between those that favor the server approach and those with a chassis-based softswitch," says Beniston.

Cirpack is one of three key independent softswitch players in Europe, alongside Italtel SpA and NetCentrex SA, and has been picking up a steady stream of contracts in the past year. It now has more than 50 customers (see Altitude Uses Cirpack , Smart Telecom Picks IBM, Cirpack, Free Chooses Cirpack for Voice, and Czech On Line Chooses Cirpack).

Thomson, which has a market capitalization of nearly $7 billion, has identified telecom as a potential growth sector. A spokeswoman says the firm already generates annual revenues of around €400 million ($523 million) from its telecom products, such as set-top boxes and VOIP gateways.

"We have identified telecom as a key growth area, and we're looking to double our revenues. This acquisition fits neatly into our triple-play strategy, which is a strategic area for Thomson," she says.

The acquisition is Thomson's second in a matter of weeks. At the end of March it bought triple-play residential gateway company Inventel for an undisclosed sum (see Inventel Previews Wireless Gateway).

— Ray Le Maistre, International News Editor, Light Reading

For further education, visit the related Light Reading Webinar archive: Softswitches: The Gateway to Profitability