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Analyst Hears Telcordia Rumblings

Light Reading
News Analysis
Light Reading
7/23/2004

Telcordia Technologies Inc. is being "shopped around" the industry, and has been for at least a month, according to industry analyst Patrick Kelly at OSS Observer.

Telcordia's parent, Science Applications International Corp. (SAIC), is reported to be offloading the software and services firm via an auction so it can concentrate on its government contracts (see SAIC May Sell Telcordia).

Kelly says there have been "rumblings" for about the past four weeks as investment bankers have pitched Telcordia to potential buyers while keeping the maneuvers a secret.

But Kelly says that's a Catch 22 situation for the sale agent, believed to be J.P. Morgan Chase & Co. in this instance (see SAIC May Sell Telcordia). The banker, he notes, "needs to put the word out, but it's difficult to keep it mum."

JP Morgan had not responded to questions regarding its involvement as this article was published. Telcordia says it is not prepared to comment on rumor or speculation.

Kelly says he'd be surprised if Telcordia were sold for more than $1 billion, and speculates that the price range will be between $600 million and $1 billion for a company where "the revenue trend is negative." (See Telcordia: Buy Buy or Bye Bye.)

And he believes the most likely outcome is a sale to a leveraged buyout firm. "I think Telcordia is too big to swallow for any ISV [independent software vendor]," he notes, referring to the suggestion that Amdocs Ltd. (NYSE: DOX) could mount a bid.

Kelly also believes it "doubtful" that Hewlett-Packard Co. (NYSE: HPQ) would get involved, opining that a purchase by a systems integrator would "create a conflict of interest. Most integrators have not had any interest in software firms."

Telcordia has been busy of late, making acquisitions of its own, reminding the industry of its wealth of intellectual property, and taking legal action against some of the sector's heaviest hitters (see Telcordia Sues Alcatel, Cisco, Lucent, NextWeb Touts Frequency Mgmt, and Telcordia Shells Out at Last). Never a dull moment in Piscataway these days, it seems.

— Ray Le Maistre, International News Editor, Light Reading

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Dr.Q
Dr.Q
12/5/2012 | 1:25:19 AM
re: Analyst Hears Telcordia Rumblings
Telecordia didn't ever seem to fit with the rest of the SAIC portfolio. It was nice to have it as a jewel in the family heirlooms, but not really as a solid business line.

- Q
2nd.Harmonic
2nd.Harmonic
12/5/2012 | 1:25:18 AM
re: Analyst Hears Telcordia Rumblings
Agree. The SAIC business is mainly in Federal R&D Contracts, and the telecom aspect of that wasn't a good fit with the rest of the business. But, they thought the price was right to try an entry into telecom (as the rats were leaving the sinking ship). Learned their lesson perhaps.

- 2H
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