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Amdocs Buys Into Cable

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News Analysis
Light Reading

As anticipated, billing giant Amdocs Ltd. (NYSE: DOX) has added to its telecom software menu with a meaty acquisition, but its target is not the one industry watchers were expecting.

Amdocs is paying DST Systems Inc. (NYSE: DST) $238 million in cash for its cable and satellite billing and customer care systems business, DST Innovis Inc. (see Amdocs Buys DST Innovis).

DST Innovis, which recorded $183 million in operating revenues in fiscal 2004, counts DirecTV, Cablevision Systems Corp. (NYSE: CVC), and Comcast Corp. (Nasdaq: CMCSA, CMCSK) among its customers.

It will become the Broadband Cable and Satellite division within Amdocs, and will be run by the current DST Innovis CEO Peter Nault and his management team, with some input from a few Amdocs suits (and, hopefully, some executives, too).

Amdocs executives told a conference call this morning that the acquisition is "all about growth, and will position Amdocs in a growing industry" as the cable and satellite players expand their service offerings. Amdocs also believes there are opportunities to sell its current telecom-focused software products to the cable and satellite sector, and that it can market DST Innovis's software on a more international scale.

Amdocs expects the acquisition to be neutral to its fourth-quarter fiscal 2005 earnings per share, excluding acquisition-related costs, but expects it to be earnings positive in fiscal 2006 and beyond. The company expects a one-off charge related to the acquisition in the fourth quarter ending September 30 this year.

The news sent Amdocs' share price up by $1.07, or 4 percent, to $27.80. DST Systems' share price rose slightly, by 5 cents to $47.

This isn't the billing firm's first acquisition in recent weeks, and telecom executives had been expecting the company to swoop again as it seeks to broaden its OSS capabilities (see Amdocs Buys Chinese Firm and Amdocs Offers OSS Suite). But the expected target was inventory management specialist Cramer Systems Ltd. (see OSS Business Is Buoyant). Inventory management is just about the hottest OSS area right now, and Cramer one of the sector's leaders (see Cramer Dubs Dubois CEO). Amdocs tried to buy its way into the market last year by bidding for Granite Systems, but was pipped at the post by Telcordia Technologies Inc. (see Telcordia Nearly Blew Granite Deal).

Cramer isn't the only company rumored to be in Amdocs' sights. Israeli newspaper Globes recently reported unnamed sources as saying that Amdocs is scoping out growing provisioning specialist Syndesis Ltd. and two other firms in the inventory management sector, MetaSolv Software Inc. (Nasdaq: MSLV) and the privately held NetCracker Technology Corp.

Amdocs declined to comment on any potential OSS acquisitions or market speculation.

— Ray Le Maistre, International News Editor, Light Reading

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