Light Reading

Analysts Mull NetCracker's New Buy

Ray Le Maistre

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        ADD A COMMENT
From The Founder
Steve Saunders provides an overview of white box networking and introduces a new "slim line" version of the OSI 7-layer model.
Flash Poll
Live Streaming Video
CLOUD / MANAGED SERVICES: Prepping Ethernet for the Cloud
Moderator: Ray LeMaistre Panelists: Jeremy Bye, Leonard Sheahan
Between the CEOs
Centec on Ethernet Switching

11|26|15   |   09:58   |   (0) comments

Centec CEO James Sun talks to Steve Saunders about Ethernet switching and the white box revolution.
LRTV Custom TV
Delivering Service Agility in the Virtualization Era

11|25|15   |   5.41   |   (0) comments

Interview with Massimo Fatato, WW OSS Business Lead, Hewlett Packard Enterprise.
Wagner’s Ring
How Might Open Source Fail?

11|24|15   |     |   (9) comments

Open source, SDN, and NFV are looking inevitable – but performance, standards proliferation and regulatory capture could derail the movement.
LRTV Custom TV
NFV Lifecycle Orchestration – a Fresh Vision for Telco

11|23|15   |   6.40   |   (0) comments

Simon Osborne, CTO Comptel, and Heavy Reading's Caroline Chappell reveal the business impacts of new SDN and NFV, and what the term service orchestration actually means. Together they define Lifecycle Service Orchestration and how the virtualized future will look for telecoms operators.
Between the CEOs
Cisco's Virtual Role in Saudi

11|20|15   |   12:15   |   (2) comments

Light Reading founder and CEO Steve Saunders talks with Zayan Sadek, Regional Manager at Cisco Systems, about the competitive communications services market and advance of virtualization in Saudi Arabia.
LRTV Huawei Video Resource Center
Huawei Leads With Kubernetes for Cloud PaaS

11|19|15   |   08:26   |   (0) comments

Huawei is looking to Kubernetes as a key tool for building robust open source technologies for customers and partners, said Ying Xiong, chief architect of cloud platform at Huawei, in an interview with Light Reading West Coast Bureau Chief Mitch Wagner at the recent Kubecon conference.
Women in Comms Introduction Videos
WiC in London: The Highlight Reel

11|19|15   |   5:33   |   (1) comment

NetCracker's Mervat El Dabae headlines an inspiring morning in London with help from leading women from Vodafone, TalkTalk, Hyperoptics and Ciena.
LRTV Documentaries
Why Saudi's So Hot for New Tech

11|19|15   |   05:07   |   (0) comments

Light Reading's Steve Saunders reports from Saudi Arabia, a hyper-competitive market desperate to embrace the next generation of communications technologies and services.
LRTV Custom TV
Why Data Models Deliver More Value Than Information Models

11|19|15   |   5.08   |   (0) comments

Stefan Vallin argues that more automation is needed to manage end-to-end services and the hybrid networks they run on, and that data models are key to achieving this.
Telecom Innovators Video Showcase
SDN Management & Orchestration in the WAN

11|17|15   |   7.20   |   (0) comments

Carol Wilson and Packet Design CTO Cengiz Alaettinoglu discuss CSPs' SDN service delivery and assurance requirements. Learn about a modular approach to building automated control, orchestration and management functions for the WAN that are policy- and analytics-driven.
LRTV Custom TV
Flash Networks: Optimizing for Radio Spectral Efficiency

11|17|15   |   3:34   |   (0) comments

Today most optimization vendors only focus on optimizing voice or data. Ofer Gottfried, Flash Networks' CTO, shows how improving data throughput and maximizing spectral efficiency reduces capital and operating expenses while also providing a platform for user engagement.
LRTV Custom TV
Making Pay-TV User Experiences Millennial-Friendly

11|16|15   |   6:42   |   (0) comments

The unique challenge of reaching and engaging Millennials is driving pay-TV video experience transformation that can include higher quality UIs, viewing of multiple content streams at once and seamless transitions between handheld devices and the television.
Allot MobileTrends Report H2/2015 reveals how daily online behavior can be used to discover smarter ways to profile customers and propose valuable, real-time offers to them.
Hot Topics
Samsung to Sell Wireless Networking Unit?
Dan Jones, Mobile Editor, 11/23/2015
Samsung: No Sale of Wireless Unit
Dan Jones, Mobile Editor, 11/25/2015
How Might Open Source Fail?
Mitch Wagner, West Coast Bureau Chief, Light Reading, 11/24/2015
Sprint to Get $1.2B From New Leasing Venture
Dan Jones, Mobile Editor, 11/23/2015
Networking Shines in HP's Gloomy Final Earnings
Mitch Wagner, West Coast Bureau Chief, Light Reading, 11/25/2015
Like Us on Facebook
Twitter Feed
December 15, 2015
Virtualizing Cable Services
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
Centec CEO James Sun talks to Steve Saunders about Ethernet switching and the white box revolution.
Light Reading founder and CEO Steve Saunders talks with Zayan Sadek, Regional Manager at Cisco Systems, about the competitive communications services market and advance of virtualization in Saudi Arabia.
Cats with Phones
Can't Find the Phone on Thanksgiving? Click Here
Check under the cat! (hint: bottom right)
Live Digital Audio

Broadband speeds are ramping up across Europe as the continent, at its own pace, follows North America towards a gigabit society. But there are many steps to take on the road to gigabit broadband availability and a number of technology options that can meet the various requirements of Europe’s high-speed fixed broadband network operators. During this radio show we will look at some of the catalysts for broadband network investments and examine the menu of technology options on offer, including vectoring and for copper plant evolution and the various deployment possibilities for FTTH/B.