Telcordia About to Be Sold

Media reports suggest a pair of buyout firms are close to buying the OSS giant for $1.3 billion

November 12, 2004

2 Min Read
Telcordia About to Be Sold

OSS giant Telcordia Technologies Inc. is on the brink of being sold for about $1.3 billion, according to media reports that emerged late Thursday.

The Wall Street Journal reported that private equity firms Warburg Pincus and Providence Equity Partners are set to jointly buy the OSS giant from its parent, Science Applications International Corp. (SAIC), though the deal could yet fall through.

Telcordia representatives declined to comment on the reports.

SAIC put Telcordia on the market earlier this year, and the OSS firm's CEO Matt Desch even negotiated a new contract with the divestment in mind (see Source: Telcordia Sends Out Feelers, Telcordia With Fries?, and Telcordia CEO $trikes $ell-Off Deal).

A poll conducted on NGS (formerly Boardwatch) showed that many in the telecom community expected the final price for Telcordia to be in the $1 billion to $2 billion range (see Whither Telcordia?).

In that same poll, just 15 percent of voters thought Telcordia would be sold to a financial institution, while 29 percent thought IBM Corp. (NYSE: IBM) would be the most likely buyer. IBM is believed to have been in talks with SAIC, along with billing giant Convergys Corp. (NYSE: CVG) and a number of other buyout firms.

Should Warburg and Providence acquire Telcordia they'll find themselves owning the primary supplier of OSS and support services to the RBOCs with quarterly revenues of more than $200 million, and a company that is desperately trying to expand its horizons beyond North America (see Telcordia Shells Out at Last, Telcordia Opens Up, and Telcordia Targets Europe – Again).

But Telcordia comes with some baggage. Its revenues are on the decline as the RBOCs look to other suppliers and squeeze the value of their deals with the OSS firm. Telcordia also has some outstanding legal issues in South Africa, and is suing a number of major vendors (see Telcordia Prepares for Court and Telcordia Sues Alcatel, Cisco, Lucent). And it has some internal staffing issues (see Inside Telcordia's Discord ).

Should the sale go through in the next few days it will be just one of a series of M&A deals to have been done recently (see OSS Firms in M&A Frenzy).

— Ray Le Maistre, International News Editor, Light Reading

For the latest intelligence and analysis of next-generation telecom market opportunities, check out the coming Light Reading Live! event: Light Reading's Telecom Investment Conference, at the exclusive Plaza Hotel in New York City, on Wednesday, December 15, 2004.

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