Aepona & Appium: SDP Minnows Merge
Malmö-based Appium, the smaller of the two companies, will become a subsidiary of Belfast-based Aepona, with shareholders of both companies having board representation at the new company, Aepona Group Ltd., though the equity ownership is not being revealed. The management makeup and staff retention plans are also under wraps at present while discussions take place with the firms' workforces during the next few weeks.
The two companies know each other well, having been deployed together at Orange (NYSE: FTE) as part of the European giant's next-generation common service delivery framework trials, conducted by a number of its Orange mobile businesses, that complement the carrier's migration towards an IP Multimedia Subsystem (IMS) network architecture. (See FT, Telefónica Talk Up IMS and AePona Tackles FMC.)
At Orange, Appium has supplied its applications server and service creation environment, while Aepona has supplied its services gateway, which sits between the network and the Appium elements. (See Appium Updates SDP.)
What Aepona also brings to the merged company is its Web services framework, which enables a carrier to allow external applications developers to build new services for its network, and a management tool that automates that development process. These capabilities were key to Aepona's recent success at Canadian carrier Telus Corp. (NYSE: TU; Toronto: T) and are becoming increasingly important to all major carriers. (See AePona Raises $10M, Wins Telus, Why Telcos Need Web 2.0, and IMS's Web 2.0 Problem.)
The two companies have other big name customers, too. Aepona boasts KPN Telecom NV (NYSE: KPN), Sprint Corp. (NYSE: S), Germany's E-Plus Mobilfunk GmbH , Russia's VimpelCom Ltd. (NYSE: VIP), and Bharti Airtel Ltd. (Mumbai: BHARTIARTL) as clients, while Appium has had success at BT Group plc (NYSE: BT; London: BTA), Teléfonos de México (Telmex) , Telecom Italia Mobile SpA (Milan: TIM), Telefónica SA (NYSE: TEF), and Vodafone Group plc (NYSE: VOD). Both firms have also been deployed by Japan's NTT Group (NYSE: NTT).
But big-name success has not meant big bucks. While neither company reveals financial details, Aepona is believed to generate twice the revenues of Appium, with the merged company believed to be on course to pull in about $30 million to $40 million a year at current levels of business.
But the market is growing, and an Aepona/Appium combination looks good on paper, according to Light Reading's Services Software Insider analyst Caroline Chappell. "The two have been doing a lot of work together, and as they are pre-integrated, a merger makes a lot of sense," she says. "It gives the combined company the same breadth of function as the competition -- for example, other SDP specialists such as Telenity Inc. and jNetX Inc. , and there is an argument for getting all this SDP commodity function from a single vendor." (See Telenity Joins Oracle SDP Initiative and Mobilkom Uses jNetX.)
That means more M&A activity in the SDP sector is likely, says Chappell. "This is the start of industry consolidation in this area. The independents are struggling, there are too many of them with similar product capabilities, and they face increasing competition from hybrid application servers, which are now adding Web 2.0 support as well. Both Aepona and Appium are excellent technology companies, though: They both helped invent the SDP market and together have a better chance of survival than many."
Survival will be tough, though, as competition for the new Aepona doesn't just come from other SDP minnows, but from IT and systems integration giants such as BEA Systems Inc. (Nasdaq: BEAS), IBM Corp. (NYSE: IBM), Microsoft Corp. (Nasdaq: MSFT), and Oracle Corp. (Nasdaq: ORCL), and major telecom equipment vendors such as Alcatel-Lucent (NYSE: ALU), Ericsson AB (Nasdaq: ERIC), and Nokia Networks .
"There's a battle now between the IT and telecom vendors, and we're in the middle," says Aepona VP of marketing Michael Crossey. "This merger makes us more attractive to customers, and the industry in general," he adds, though he says there are "no specific plans" to put up a "For Sale" sign in front of the Belfast HQ at present.
— Ray Le Maistre, International News Editor, Light Reading