Concord Locks $86M War Chest

OSS vendor Concord Communications Inc. (Nasdaq: CCRD) has raised more than $86 million, and it looks to be going Christmas shopping.

The performance management software firm, which specializes in systems designed to help manage IP networks, is in growth mode, closing fresh carrier deals and chasing new business with service providers looking to offer VOIP services (see Concord Bags French Deal and Concord Tackles VOIP Management).

But Concord can't fly alone; it still needs to add to its software armory. The company recently completed an $86.25 million convertible senior notes offering and stated in a filing with the Securities and Exchange Commission (SEC) that the funds are for general purposes and "potentially for future acquisitions." The total was $11.25 million more than originally planned, as the initial purchaser of the notes took up the option of an over-allotment.

Concord executives in Europe confirm that the firm is actively hunting acquisition targets to add to its recent additions (see Concord Buys NetViz), especially in specialist fault management areas such as root cause analysis. Andy Waterhouse, a Concord principal consultant based in the U.K., says the key thing to deliver to customers now is not just root cause analysis of faults with the network, but OSS that can identify the exact causes of problems at the application, as well as the network, layers and provide "real business impact analysis."

Being able to provide applications performance management is becoming increasingly important as enterprises and carriers step up their use of time-critical IP services such as VOIP.

So who might Concord have in its sights? Patrick Kelly, cofounder and analyst at OSS Observer, says root cause analysis specialist System Management Arts Inc. (Smarts) would be "a good fit as Concord tries to penetrate the fault and event management market segment." Kelly notes that "several Concord mid-level managers have joined Smarts" recently.

Smarts is a private company and doesn’t reveal its finances, but Kelly believes it has revenues of between $20 million and $30 million a year. It claims to be profitable quarter on quarter, and has raised $40 million in funding.

Certainly Smarts has the same outlook on the importance of being able to analyze the applications running on a network, and is in limbo about how to build its own business (see Smarts Faces Growth Dilemma). In addition, the two companies already have a reseller arrangement.

Smarts scored well among the privately held startups in the fault management category of a recent Heavy Reading OSS market perception study (see Heavy Reading Takes on OSS). While it only came in eighth place overall in the carrier survey of fault management OSS vendors, trailing larger players such as Agilent Technologies Inc. (NYSE: A), Hewlett-Packard Co. (NYSE: HPQ), and Telcordia Technologies Inc., its brand recognition rating of 23 percent and commendable scores in the price, performance, and service and support categories, made Smarts the pick of the startups.

Kelly also suggests that a merger with Micromuse Inc. (Nasdaq: MUSE) "would have a more significant impact on the IP performance and fault management market," but says this is a long shot as both firms have preferred to grow by acquiring technology from niche suppliers. Micromuse came in third in the fault management category of the Heavy Reading report, with a recognition rating among telecom operators of nearly 47 percent.

Concord has been one of 2003's OSS success stories, augmenting its revenues incrementally and staying profitable (see table).

Table 1: Concord Increases Revenues, Stays Profitable
3Q03 2Q03 1Q03 4Q02
Revenue $26.6M $25.6M $24.1M $23.6M
Gross profit $21.6M $20.9M $19.5M $19.4M
Operating income $58,000 $811,000 $429,000 $305,000
Net income $481,000 $1,198,000 $836,000 $753,000
Source: Company data

The company's share price has been on the rise for most of 2003. While the stock was up slightly yesterday by 13 cents at $17.69, valuing the company at $320 million, it has had a 52-week low of $6.60, and a high of $23.12, reached at the end of November as it announced the senior notes offering.

— Ray Le Maistre, International Editor, Boardwatch

BobbyMax 12/4/2012 | 11:10:10 PM
re: Concord Locks $86M War Chest If the OSS offered by Concord cannot manage and support various applications running on a VOIP network will not do much. The OSS should be ablke to report network problems as well as application problems.
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