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Optical/IP

Aastra Ups Its Euro Telephony Assault

Two years ago Canadian equipment supplier Aastra Technologies Ltd. didn't have a PBX presence in Europe. Today it announced its third acquisition in the continent's enterprise telecom sector in 24 months with the purchase of German telephony systems vendor DeTeWe AG for €35 million (US$42.3 million). (See Aastra to Buy DeTeWe.)

Today's move follows the purchase late last year of the PBX business of European defense firm EADS for €72.5 million (US$87.6 million) and the July 2003 C$35 million ($29 million) acquisition of Ascotel, the loss-making PBX business of Swiss firm Ascom AG.

Like Ascotel and the EADS business, DeTeWe is loss-making and, according to its previous owner, the privately held Röchling Group, a business in decline. But the market for IP and hybrid IP/TDM PBX systems is growing, and Aastra's investors took kindly to the news, as the vendor's share price jumped by C$1.07, nearly 6 percent, to C$20.08 in early trading on the Toronto stock exchange (see IP PBX Market Heats Up).

Certainly Aastra appears to have struck a decent deal. DeTeWe, which sells DECT handsets and its own small PBXs to businesses, and also resells larger PBX systems supplied by other vendors, generated revenues of €175 million ($211.4 million) in 2004, but suffered a loss as Röchling suffered one-time restructuring costs as a result of cutting the DeTeWe staff from 1,300 to 700.

Infonetics Research Inc. analyst Matthias Machowinski, who follows the enterprise voice and data market, says the deal doesn't give Aastra too much in terms of additional technical capabilities, but it does give the firm a much larger presence in Germany.

But that market became much more competitive recently, adds Machowinski, when PBX giant Avaya Inc. (NYSE: AV) acquired German firm Tenovis in November 2004.

And although Germany is DeTeWe's major market, the acquisition also gives Aastra a presence in the enterprise telecom systems integration markets in Denmark, France, Italy, Switzerland, and the U.K.

The impact on the overall PBX market is minimal, though. Machowinski says that only about a third of DeTeWe's expected 2005 revenues of $157 million will come from PBX sales, raising Aastra's share of the $2.8 billion European PBX market by a few percentage points at most (see Infonetics Reports on IP PBXs).

But he notes that Aastra is a consistently profitable company that has paid only about one quarter of DeTeWe's expected 2005 revenues for the German firm. "If the cost structure is brought inline, I'm sure this business will contribute positively to the bottom line," says the analyst.

It's also worth noting that Aastra has a position in the increasingly fashionable telco video market too (see Who Makes What: Telco Video). It acquired Lucent Technologies Inc.'s (NYSE: LU) original digital video unit in 2001 and now markets MPEG-2 head-end and set-top box devices to telecom operators and broadcasters (see Lucent Sells Video to Aastra).

— Ray Le Maistre, International News Editor, Light Reading

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