Telcordia Leaves Legal Luggage

Telcordia's parent SAIC could take a massive hit if the OSS firm loses its legal battle with Telkom

December 13, 2004

1 Min Read
Telcordia Leaves Legal Luggage

Science Applications International Corp. (SAIC) may have agreed to the sale of Telcordia Technologies Inc., but it may be left with an unwelcome parting gift if the OSS giant loses an ongoing legal battle (see SAIC Sells Telcordia).

In a filing with the Securities and Exchange Commission (SEC), SAIC says it has agreed to pay out if Telcordia loses its court case against South Africa's national operator Telkom SA Ltd., even if the sale has already gone through (see Telkom vs Telcordia: Case Not Closed). That could cost SAIC up to $300 million.

The flipside, though, is that SAIC banks the proceeds, up to $130 million, if Telcordia wins the case.

In addition, SAIC has struck a deal with Telcordia's soon-to-be-owners, buyout firms Warburg Pincus and Providence Equity Partners, through which it will receive 50 percent "of the net proceeds Telcordia receives in connection with the prosecution of certain patent rights." (See Telcordia Sues Alcatel, Cisco, Lucent.)

Telcordia has already successfully collected patent infringement payments from Marconi Corp. plc (Nasdaq: MRCIY; London: MONI) this year (see Telcordia Pockets Patent Payment).

The sale of Telcordia is due to close in February 2005.

The news comes as SAIC announced its financial results for the three months to October 31. Telcordia recorded revenues of $226 million, up from $217 million in the prior quarter, and an operating income of $41 million, down from $48 million in the previous three months.

SAIC also noted that Telcordia laid off another 42 in the most recent quarter -- or, as SAIC puts it, "continued to have involuntary workforce reductions." This will bring its workforce down to about 3,150.

— Ray Le Maistre, International News Editor, Light Reading

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