Genband Inc. has agreed to buy Tekelec Inc.'s switching business for $1 million in cash, a stake in Genband, and the assumption of some of Tekelec's liabilities, both companies announced this evening. Light Reading first reported March 14 that the two firms were in talks and very close to a deal. (See Genband in Switching Biz Talks With Tekelec.)
In little more than a year, Genband has shortened its name, revamped its marketing, and acquired Syndeo, BayPackets, and some switching businesses from Siemens. (See GenBand Buys Siemens Unit, Genband on the Run, and Genband Splashes Out for BayPackets.) Now the company is saying it will be profitable and won't choke on Tekelec's 465-person business unit, which once existed as three separate companies.
The deal will take Tekelec's switching solutions business, which includes Tekelec's acquisitions of Santera, VocalData, and Taqua, and put the whole enchilada under the management of Genband CEO Charlie Vogt. Vogt held executive roles at Santera, was the CEO of Taqua when Tekelec bought it, and was instrumental in helping Tekelec buy VocalData.
"You could see this as a case where we get to finish what we started," Vogt says.
Tekelec will now be a shareholder in Genband. Genband gets the equity interests in "Santera Systems LLC and Taqua, Inc. and the SSG business assets of Tekelec." Tekelec gets a 19.9 percent common equity interest in Genband, $1 million in cash, and Genband's "assumption of certain SSG [switching solutions group] liabilities," Tekelec announced this evening.
Tekelec added that in connection with the deal, it "expects to record a net loss after tax on a GAAP basis of approximately $55 million to $70 million."
Plano, Texas-based Genband has about 200 employees now. Vogt says there will be an "all hands" meeting with both groups on Thursday to discuss how large a company the new Genband will become. "Clearly not every employee that's a part of the two companies will be a part of the new company," Vogt told Light Reading in an interview today.
Vogt also puts down the idea that buying a money-losing switching business from Tekelec will put Genband off its track to profitablity. "When you're a venture funded company, you don't have that luxury," he says.
"We will be profitable before year end," Vogt adds.
Vogt describes the new Genband as the application server and gateway vendor of choice for VOIP and IMS networks. They won't go after the signaling market nor the softswitching pure plays.
What the new company will do is continue to build on its existing businesses, which Genband claims includes 500 telecom service provider customers worldwide, with a smattering of those being cable MSOs or wireless providers.
Vogt says Citigroup represented Genband in the deal and is very much on board with getting the company public. "They see a clean path to an IPO as early as Q1 next year," he says.
Before adding the Tekelec bits, Genband was on track to book more than $40 million in revenues this year. The company declined to give any current post-acquisition projections.
Analysts say Tekelec's switching business booked about $110 million in revenue last year, with a large chunk of that coming from Alcatel-Lucent. Genband's Vogt doesn't seem worried about Alcatel (a Genband investor) taking a sour view of the deal. "We have a very strategic relationship with Alcatel, and I think it will become bigger and stronger," Vogt says.
Tekelec shares were up $1.08 (7.99%) to $14.60 in trading on Tuesday.
â€” Phil Harvey, Managing Editor, Light Reading