Thomson Buys Cirpack, Reports Q1

Thomson acquires Cirpack; reports strong revenue growth in first quarter 2005

April 21, 2005

6 Min Read

PARIS -- Thomson (NYSE:TMS)(Euronext Paris:18453) has acquired Cirpack, the European leading provider of softswitch platforms. Following the acquisition of Inventel on March 29, 2005, Cirpack's softswitch technology expertise complements Thomson's existing offering to telecoms operators in Internet Protocol (IP) telephony and triple play (voice, video, data).

Created in 1998, Cirpack, a private company based near Paris funded by Siparex Ventures, Iris Capital and Endeavour L.P., employs approximately 60 people and more than doubled its revenues between 2003 and 2004. Cirpack addresses the voice management market, which is poised to expand at a very high growth rate in the coming years. With a wide European customer base of over 45 telecom operators and Internet Service Providers (ISPs), the company has secured the largest share of the European softswitch market.

Telecom infrastructure is undergoing profound changes as it moves to next generation network technologies. A softswitch is the software platform responsible for controlling call processes in the network, as well as managing remotely access devices and service applications. It is key to helping telecom operators drive voice, data and video convergence in IP networks, in order to allow effective delivery of innovative communication and entertainment services.

The acquisition will complement Thomson's existing offering in IP telephony, remote management and access products and gateways for triple play services. It is the logical extension of the acquisition of Inventel, a European leader in home gateways for fixed broadband network operators and in wireless voice and data communications (DECT, WiFi, Bluetooth). The integration of Cirpack will also bring significant synergies in term of customer base, particularly with ISPs (important Cirpack clients) and Tier-1 European telecom operators (important Thomson and Inventel clients), and with telecom operators in North America and Asia.

The acquisition cost is in line with Thomson's acquisition criteria. As in the case of Inventel, and under similar one and two year lock-up provisions, Thomson has given the opportunity for managers of Cirpack (advised by Arma Partners), who are its majority shareholders, to receive most of their consideration in Thomson treasury shares. As in the case of Inventel, Thomson will purchase over time in the market an amount of shares equivalent to that contributed in this transaction (estimated at 2 million shares). The Cirpack acquisition will be accretive.

Cirpack will be part of Thomson's Access Platforms & Gateways Business Unit within the Systems & Equipment Division. This Business Unit is the world leader in access products and solutions to satellite, cable and terrestrial operators worldwide. It offers a broad range of telecom systems and equipment such as voice products, high-speed DSL modems, IP video boxes and multiple-play gateways.

"An aggressive expansion of our business with telecom operators is a key pillar of our Two-Year Plan. With this important client base, the combination of Thomson's existing strengths, enhanced triple-play system expertise, and products and technologies developed by Inventel and Cirpack, enable us to reconfirm our growth objectives with full confidence," said Frank Dangeard, Chairman & CEO of Thomson.

---In a separate release---

PARIS -- The Board of Thomson (Euronext Paris: 18453, NYSE:TMS) met on April 19, 2005,under the Chairmanship of Frank Dangeard, to review revenues for the quarter ended March 31, 2005 andthe first three months of execution of the Group’s Two-Year Plan.

Thomson’s first quarter sales are presented according to the organization structure announced on November 30, 2004and implemented on January 1, 2005. Group revenues are broken down for analysis purposes between the three Media& Entertainment divisions – Services, Systems & Equipment and Technology, as well as Corporate activities, which arecollectively termed “Thomson Core”, and Thomson’s Displays and CE Partnerships division. Revenues are presentedaccording to IFRS unless stated. Accordingly, the table below sets out our revenues on a reported basis as well asadjustments for currency.

Commenting on the first quarter sales, Frank Dangeard, Chairman & CEO of Thomson stated: “The 14.8%increase in our Core business revenues announced today, demonstrates the sound business model on whichThomson has based its Two-Year Plan for profitable growth.”

First quarter 2005 Thomson Core sales highlights

Sales excluding currency movements grew by 14.8%. Currency movements reduced core business salesduring the quarter by 43 million euros. Thomson Core businesses reported net sales for the first quarter 2005of 1,354 million euros (first quarter 2004, 1,217 million euros).Perimeter effects from acquisitions in Thomson core added 38 million euros to net sales during the quarter(of which 35 million euros in the Services division, and 3 million euros in the Systems & Equipmentdivision). Acquisitions showed good growth over their prior year revenues.

All divisions reported like-for-like growth in revenues at constant currency, in particular in DVD servicesand post-production (Services), set top boxes (Systems & Equipment) and Licensing (Technology).

Displays and CE partnerships

The Group continued to press forward with its strategy of partnership for tubes. Its major plant in Anagni,Italy, was transferred to a partner, Videocon, on February 28. The Group is well into the second phasediscussions with a number of interested parties concerning partnership of its remaining tubes assetsThomson will announce shortly the creation of a sales force dedicated to its Connectivity business andaccordingly TCL and Thomson announce today that Thomson’s TV Marketing & Sales activities will betransferred to TTE. Thomson employees with positions related to TV would transfer to TTE under the plan,and employees focused on Thomson’s Connectivity Business activities will remain with Thomson. Inaddition, Thomson and TTE will simplify their current arrangements regarding Thomson’s manufacturingfacility at Angers. These arrangements are expected to be operationally and financially beneficial toThomson and TTE.

Business and strategic initiatives in the first quarter – First three months of execution of the 2-Year Plan

On November 30, Thomson announced a Two-Year Plan to accelerate growth in its Media & Entertainmentbusinesses and add 1.5 to 2.0 billion euros of revenues to Thomson’s Core business revenue base. The firstquarter 2005 growth, combined with the other strategic initiatives taken during the quarter support theseobjectives. These initiatives are around the Group’s 4 strategic priorities – Media & Entertainment Clients,Media Technologies, Electronic Content and IP Devices and Solutions – and cover new services andproducts, client initiatives and wins, transversal technology developments and a focus on geographicopportunities, notably in Asia and the Middle East. These growth initiatives are both internal, in order toboost organic growth, and external to accelerate Thomson’s access to new products and technologies toleverage with its customer base.

As part of the Two-Year Plan to double its business with telecoms operators, Thomson announces today theacquisition of French-based company Cirpack. Following the acquisition of Inventel on March 29, Cirpack’ssoftswitch technology expertise further complements Thomson’s existing offering to telecoms operators inInternet Protocol (IP) telephony and triple play (voice, video, data). This technology is key in helpingtelecom operators drive voice, data and video convergence in IP networks, in order to allow effectivedelivery of innovative communication and entertainment services.

In summary, the significant progress made during the quarter supports the Two-Year Plan objectives.


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