Light Reading
NetCracker may choke on Convergys SPIT assets, reckons one analyst, while another sees AlcaLu and integrators as the potential casualties

Analysts Mull NetCracker's New Buy

Ray Le Maistre
3/29/2012
50%
50%

The news that NEC Corp. (Tokyo: 6701)'s Service Provider Information Technology (SPIT) subsidiary NetCracker Technology Corp. will acquire Convergys Corp. (NYSE: CVG)'s Information Management telecom software business unit for $449 million has generated varied responses from the analysts who follow the telecom software sector. (See NEC to Buy Convergys Unit for $449M.)

Heavy Reading Senior Analyst Ari Banerjee has already stated that he believes Convergys IM is a good fit for NetCracker. (See NetCracker Plays End-to-End Game.)

Infonetics Research Inc. Directing Analyst Shira Levine is also positive. "I understand the rationale behind the acquisition," she notes in an emailed response to questions. "In many ways, NEC is following the lead of Ericsson AB (Nasdaq: ERIC), Huawei Technologies Co. Ltd. , etc. in beefing up its software business as equipment becomes commoditized and margins continue to decline for that business."

And she believes NEC is getting a good deal, "given the significant investment that Convergys has made in the IM business over the years."

Levine does have concerns over NetCracker's post-acquisition challenges. The Convergys unit will be a "pretty big mouthful for NEC/NetCracker to swallow. ... Convergys will be integrated into the NetCracker portfolio, and I think that will be a difficult endeavor."

However, Analysys Mason partner and head of Telecoms Software Research Larry Goldman believes NEC/NetCracker stands to make a good job of assimilating Convergys IM.

"We expect that Convergys IM will remain a strong or slightly stronger competitor as a result of this acquisition," states Goldman in a research note shared with Light Reading. "Previous acquisitions of software suppliers by network equipment suppliers have notoriously destroyed valuable businesses, but NEC showed with its acquisition of NetCracker in 2008 that it was able to preserve the independent value of an established software business. By organizing Convergys IM in the NetCracker unit, NEC is signaling its intent to preserve that same independence."

He does agree with Levine on the main reason behind NEC's decision to acquire the Convergys unit, as he sees the move as a way for NEC to lessen its dependence on equipment sales, especially in Japan.

"The most fundamental motivation for NEC in this acquisition is to strengthen its software and services offers. ... IT services is already a bigger business within NEC than selling carrier equipment. This acquisition strengthens its position outside of Japan and complements its existing NetCracker OSS products. The billing area is not a fast-growing segment, but NEC can reasonably hope for increased services business that accompanies all billing and customer care implementations."

And like Heavy Reading's Banerjee, Goldman expects NEC to invest in its new assets once the deal closes. "We think it is likely that NEC will invest in strengthening some aspects of the IM products, particularly in real-time rating and charging. We also expect NEC to apply its strengths in implementation services to the Convergys products business, making NEC overall a more complete supplier, and reducing Convergys IM's dependence on third-party integrators."

And it's not just integrators that stand to lose out. Goldman notes that "Convergys is Alcatel-Lucent (NYSE: ALU)'s preferred billing systems supplier for deals where Alcatel-Lucent is the prime integrator in network operator solutions." (See Major Vendors Kiss OSS and AlcaLu, Convergys Team Up.)

Now it's likely AlcaLu will need to find another independent billing systems vendor with which to team up, just like it had to after Ericsson acquired its previous billing partner LHS in 2007. (See Ericsson Buys Billing Vendor LHS and LHS, AlcaLu Team Up.)

— Ray Le Maistre, International Managing Editor, Light Reading

(0)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
Flash Poll
LRTV Custom TV
A New Security Paradigm in SDN/NFV

7|28|14   |   02:54   |   (0) comments


Paul Shaneck, Global Director Network Solutions for Symantec, discusses the evolving virtualized network, explaining how Symantec is leading the security discussion as it relates to SDN and NFV, and helping to ensure the network is protected and compliant.
LRTV Documentaries
Sprint's Network Evolution

7|24|14   |   14:59   |   (0) comments


Sprint's Jay Bluhm gives a keynote speech at the Big Telecom Event (BTE) about Sprint's network and services evolution strategy, including Spark.
LRTV Documentaries
BTE Keynote: The Software-Defined Operator

7|24|14   |   18:43   |   (1) comment


Deutsche Telekom's Axel Clauberg explains the concept of the software-defined operator to the Big Telecom Event (BTE) crowd.
Light Reedy
Numbers Are In: LR's 2014 Salary Survey

7|24|14   |   1:25   |   (7) comments


Our fourth annual Salary Survey paints a picture of who's hiring, firing, earning, and yearning for a change in the telecom industry.
LRTV Custom TV
Driving the Network Transformation

7|23|14   |   4:29   |   (0) comments


Intel's Sandra Rivera discusses network transformation and how Intel technologies, programs, and standards body efforts have helped the industry migration to SDN and NFV.
LRTV Custom TV
Distributed NFV-Based Business Services by RAD

7|18|14   |   5:38   |   (0) comments


With the ETSI-approved Distributed NFV PoC running in the background, RAD's CEO, Dror Bin, talks about why D-NFV makes compelling sense for service providers, and about the dollars and cents RAD is putting behind D-NFV.
LRTV Custom TV
MRV Accelerating Packet Optical Convergence

7|15|14   |   6:06   |   (0) comments


Giving you network insight to make your network smarter.
LRTV Custom TV
NFV-Enabled Ethernet for Generating New Revenues

7|15|14   |   5:49   |   (0) comments


Cyan's Planet Orchestrate allows service providers and their end-customers to activate software-based capabilities such as firewalls and encryption on top of existing Ethernet services in just minutes.
LRTV Custom TV
Symkloud NVF-Ready Video Transcoding, Big Data

7|9|14   |   3:41   |   (0) comments


Kontron and ISV partner Vantrix demonstrate high-performance video transcoding and data analytic solutions on same 2U standard platform that is ready for SDN and NFV deployments made by mobile, cable and cloud operators.
LRTV Huawei Video Resource Center
The Evolving Role of Hybrid Video for Competitive Success

7|4|14   |   4:09   |   (0) comments


At Huawei's Global Analysts Summit in Shenzhen, China, Steven C. Hawley from TV Strategies speaks to us about the evolving role of hybrid video for competitive success.
LRTV Huawei Video Resource Center
How CSPs Leverage Big Data in the Digital Economy

7|4|14   |   4:48   |   (2) comments


Justin van der Lande from Analysys Mason shares with us his views on how telecom operators can leverage customer asset monetization with big data. His discusses the current status of big data applications and the challenges and opportunities for telecom operators in the digital economy era.
LRTV Huawei Video Resource Center
Accelerator for Digital Business Future Oriented BSS

7|4|14   |   3:08   |   (0) comments


Mobile and internet are becoming intertwined; IT and CT are integrating; and leading CSPs have begun to transform to information service and entertainment providers. How should the BSS system evolve to enable this transformation? Karl Whitelock, an analyst at Frost & Sullivan, shares his views.
Upcoming Live Events!!
September 16, 2014, Santa Clara, CA
September 16, 2014, Santa Clara, CA
October 29, 2014, New York City
November 6, 2014, Santa Clara
November 11, 2014, Atlanta, GA
December 9-10, 2014, Reykjavik, Iceland
June 9-10, 2015, Chicago, IL
Infographics
Packet Design asks network professionals how they handle the cloud, SDN, and network management.
Today's Cartoon
Vacation Special Caption Competition Click Here
Latest Comment
Hot Topics
Cisco Puts a Fog Over IoT
Sarah Reedy, Senior Editor, 7/23/2014
Apple Earnings: Strong iPhone Sales, iPad Sales Slump, $7.8B Profit
Mitch Wagner, West Coast Bureau Chief, Light Reading, 7/22/2014
Salary Survey Report 2014
Sarah Reedy, Senior Editor, 7/23/2014
Facebook: 30% of Users Are Mobile-Only
Mitch Wagner, West Coast Bureau Chief, Light Reading, 7/24/2014
U-verse Growth Slips But Still Strong
Alan Breznick, Cable/Video Practice Leader, 7/24/2014
Like Us on Facebook
Twitter Feed