LR Picks M&A Strategy Finalists

Light Reading names the Leading Lights finalists for M&A Strategy, Public Company

December 2, 2005

6 Min Read
LR Picks M&A Strategy Finalists

Looking back at the past year in telecom, some acronyms stand out a mile. IMS is one. IPTV another. But for many, 2005 will be the year M&A sprang back out of its box and made some investors and bankers very happy again.

But acquisitions can be tricky affairs -- integrating another company's technology, people, and culture is hard to get right. And when it goes wrong, it can lead to disaster. Just ask any of the major vendors that splashed at the height of the dotcom bubble.

But the Leading Lights Awards category of M&A Strategy, Public Company isn't about companies that thought they'd bought a diamond and ended up with glass. It pays tribute to those listed companies that made sensible, strategic acquisitions that will help expand their businesses and ensure long-term success.

The Leading Lights Award winners will be announced at an Awards Dinner after The Light Reading Telecom Investment Conference in New York City on December 14.

So who's in the running? Well, in alphabetical order, we can start with what can quite fairly be called the "Mother of all Acquisitions…"

  • AT&T Inc. (NYSE: T):

    There's probably a Latin word for children who eat their mothers, but we don't know what it is. Instead, let's remind you about how the RBOC formerly known as SBC Communications ate its former parent, affectionately known as Ma Bell, and then took her name. And ticker symbol. (See SBC to Buy AT&T for $16B, SBC Becomes AT&T, and New AT&T Launches.)

    This combination makes the new AT&T the biggest fixed-line carrier in the U.S., even once Verizon Communications Inc. (NYSE: VZ) and MCI Inc. (Nasdaq: MCIP) are paired up. (See Opal Chooses MDS for Billing and Verizon-MCI Cleared .)

    It also gives gives the carrier a combination of domestic and international strength, from the old AT&T's overseas network and partnerships, that will make it even more attractive for major business customers. This was a powerhouse acquisition that demanded attention and respect.

  • Cisco Systems Inc. (Nasdaq: CSCO):

    As ever, Cisco has been busy buying bolt-on companies this year, and although it went through a spate of buying security-related companies, it has spread its interests as far and wide as OSS, with Sheer Networks, and telco video, with Scientific-Atlanta Inc. (NYSE: SFA). (See Sci-Atlanta: Cisco's IPTV Lifeline?, Sheer Delight for Cisco, Cisco KiSSes Up to Telco TV, Cisco Nets NetSift for $30M, Cisco Buys Startup for $1.2M per Employee, and Cisco Chomps FineGround.)

    And how could we not shortlist a firm that buys a company called Nemo Systems? That's so CUTE. (See Cisco Finds Nemo.)

    So what's the thinking behind Cisco's acquisition strategy? As the company states in its contest entry, its motive is similar to that of other technology vendors, to "supplement internal developments… to offer customers a broad range of solutions in networking for the Internet."

    But Cisco puts a finer point on it than most, adding that each acquisition it makes "directly or indirectly contributed to Cisco’s ongoing development and success."

    Whatever, you have to admire Cisco's persistence in buying and integrating companies, and if recent developments are any indication, a few IPTV startups might be high with excitement at the moment.

  • ECI Telecom Ltd. (Nasdaq: ECIL):

    Feeling short of confidence? Pop around to ECI, hang out there a bit, and some of its ambition is bound to rub off on you.

    This is a company that says it wants to go places, then goes there. "We're going to get into IP," said ECI. (See ECI Lines Up Acquisitions.)

    And then it did. (See ECI to Buy Laurel for $88M.)

    That was in May, and just recently ECI's new division built around Laurel, the Data Networking division, launched its "Multi-Service Access Gateway (MSAG) platform to create a comprehensive solution that delivers a full range of IP video services." (See ECI, Keymile Debut IP DSLAMs.)

    And in the future, ECI plans to use the division's IP platform to develop next-generation access and optical products. (See ECI Posts 26 Percent Growth .)

    And that wasn't all. It also bought its way into one of the fastest developing, and, from a manufacturing perspective, one of the most cost-effective markets in the world, too, namely China. (See ECI Buys Optical Biz in China.)All in all, ECI knows where it wants to be and is walking the walk as well as talking the talk.

  • JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU):

    Back in May, JDSU splashed out a cool $760 million on test-and-measurement firm Acterna. Brave stuff. But Acterna is no small fry, with $440 million in revenues in the year to March 2005, and it's one of the leading players in the access network test space, which is a pretty hot place to be, what with all this talk of video over IP and what-not. (See JDSU Buys Into Testy Market, Acterna Puts Video to the Test, and JDSU Unveils Video Testers .)

    The deal takes JDSU into the $1 billion-plus-revenues-per-year region, and "doubles the size of JDSU’s addressable communications market to more than $5 billion. With this acquisition, it becomes the leading provider of optical communications sub-systems and broadband test and measurement systems," gushes the company proudly.

    Fast-forward to November, and JDSU big cheese Kevin Kennedy was all smiles about the impact of the deal, though there's still some work to be done in terms of the big picture. (See Revenues Ramp at Test Vendors and JDSU Sells More, Cuts More.)

    And he's bullish about the future, too, not surprisingly. “Broadband and optical solutions are foundational to the growth of IP-based residential and business services,” says Kennedy. “We believe that vendors with a broad portfolio of vertically integrated broadband and optical solutions are best equipped to succeed in this market. With the addition of Acterna, we believe our combined portfolio and global sales channel will improve our ability to serve our customers as they deploy next generation IP services.”

    He believes. And he's not alone.

  • Juniper Networks Inc. (Nasdaq: JNPR):

    This year, Juniper bought a bunch of companies with pretty dandy names, Check them out -- Funk, Acorn Packet, Peribit, Redline, Kagoor. (See Juniper Gets Into $122M Funk, Juniper Buys Little Acorn , Peribit Deal: More to Come, Juniper Takes Two: Peribit & Redline, and Juniper to Acquire Kagoor.)

    But more entertaining is the way Juniper went out of its way to stop us from giving it credit for thinking first, then spending later.

    Juniper has NO acquisition strategy. And we didn't make that up. (See Juniper's Secret.)

    When asked the motive for making its acquisitions, the company submitted the following response: "Juniper doesn’t have an acquisition strategy. It is a tactic to capitalize on our opportunities. Organic innovation is our primary focus."

    And it doesn't end there. "Juniper doesn’t necessarily NEED anything that we don’t currently have." Words almost fail us… "That said, we watch the markets and if there are opportunities in the market to realize the potential of our traffic processing strategy we will make acquisitions."

    There is nothing more to say. Good luck, Juniper.

    — The Staff, Light Reading

  • For more information on the Leading Lights Awards, click here.

  • For more information on The Light Reading Telecom Investment Conference, click here.

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