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Leading Lights 2016 Finalists: Best Deal Maker

Iain Morris
5/19/2016

This past year has featured some of the most dramatic M&A activity the telecom industry has seen in years, not to mention a number of groundbreaking partnership deals.

Consolidation always prompts plenty of debate about the pros and cons for the players involved. But which takeovers and alliances make perfect sense and which look more dubious? More often than not, it seems, consolidation can leave companies mired in difficulties as they try to integrate overlapping operations. And, of course, the industry has borne witness to a couple of mega deals that have led to years of losses at the new-look entities.

We're more optimistic about many of the deals that have taken place this year, and a total of seven players have made it through to the final stage of our Leading Lights award for Best Deal Maker. Even in some of these instances, a few doubts hover over the rationale for deal-making. Yet all have made a strong case for the merits of their respective activities.

Details of each player and the strategy it is pursuing are provided below. Winners are to be announced at the Leading Lights Awards dinner on Monday, May 23, at the Hotel Ella in Austin, Texas. For more details about that, see this Leading Lights 2016 Awards page. The following day, the Big Communications Event 2016 opens its doors for two days of networking and learning.

In alphabetical order, the seven finalists for the Best Deal Maker award are as follows:

ADVA Optical Networking -- Overture and other acquisitions
As we postulated at the time, while ADVA Optical Networking (Frankfurt: ADV) 's $35 million takeover of Overture Networks Inc. might not have moved the "financial needle" too far, in terms of sales and earnings, it propelled ADVA into what is probably the hottest communications networking market of the day -- virtualization.

ADVA CEO Brian Protiva knows this puts him up against the big guns of Overture Networks Inc. , Ericsson AB (Nasdaq: ERIC), Huawei Technologies Co. Ltd. and Nokia Corp. (NYSE: NOK), but reckons the marriage between ADVA's hardware and software capabilities and Overture's own software expertise will have a real impact in the market.

The Overture takeover is not the only bit of M&A ADVA has completed in the last year. In August, it bought a Finnish company called Time4 Systems, which produces "SFP-based pluggable clock devices," to take advantage of new "synchronization" opportunities. It has also picked up the engineering division of mic AG/FISEC, a technology incubator, which is focused on developing optical monitoring technology for fiber networks.

But it's the Overture deal that really grabs the attention. That's the kind of move the midsized vendors need to take if they are to avoid becoming irrelevant, and it sees ADVA through to the final round of judging.

Amdocs -- Comverse acquisition
Amdocs Ltd. (NYSE: DOX) announced its $272 million deal to buy Comverse Inc. (Nasdaq: CNSI) in April last year, but the transaction wasn't completed until July. Besides bolstering the BSS capabilities of Amdocs, the move has helped diversify the Israeli company's customer base, exposing it to a number of Tier 3 and 4 service providers in the markets of Asia, Europe and Latin America, in particular.

It stacked up largely because there was so little overlap between Amdocs and Comverse in terms of BSS customers. That means it has provided plenty of opportunities for the cross-selling of products and services. And those offerings have been developed since the deal happened to benefit from the capabilities of both players.

Analysts also welcomed the tie-up when it was first announced. "We expect this acquisition to improve Amdocs' standing in the overall BSS market and to provide it with greater opportunities to cross-sell and up-sell its wider portfolio," said John Abraham, a senior analyst at market-research company Analysys Mason , in a research note. Moreover, despite tough conditions, Amdocs' share price is up since this time last year. The Comverse takeover might not be as eye-catching as some other deals, but it's a worthy contender for this award.

Cisco/Ericsson -- Partnership and other acquisitions
Grabbing Light Reading headlines in late 2015, the strategic alliance between Cisco and Ericsson brings together the world's biggest maker of IP equipment with its second-largest manufacturer of communications service provider networks (behind China's Huawei). Widely seen as a response to the tie-up between Nokia and Alcatel-Lucent (NYSE: ALU) (more on that later), and a means of standing up to China's Huawei, the partnership has considerable firepower, with a global presence, about 76,000 professional services staff between them and more than 56,000 patents.

Since the partnership was announced, the companies claim to have engaged with numerous customers on product development, and they have drawn particular attention to their collaboration on a next-generation 5G router -- which they say will be the industry's first. They are also developing new technologies in the areas of IP core, fixed cable broadband access, business VPN, mobile backhaul, IP transformation services, and IP and IT managed services.

Besides teaming up with Ericsson, Cisco has been as acquisitive as ever, snapping up businesses including Synata (cloud platform provider), Leaba Semiconductor, CliQr Technologies (another cloud platform player), Acano (conferencing software), 1 Mainstream (yet another cloud platform company) and Lancope Inc. (analytics).

But its most noteworthy takeover was the $1.4 billion February deal for Jasper Technologies, whose Internet of Things (IoT) service platform -- it is hoped -- will help Cisco to generate a greater proportion of revenues from software and services, and become less reliant on hardware sales in the process. With 3,500 enterprise customers, and 27 service provider partners, Jasper was an IoT force to be reckoned with before the Cisco takeover. Now that it has the backing of the world's biggest IP equipment company, its prospects can surely only get better.

Next page: CommScope, Infinera, Netscout and Nokia

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