OSS Business Is Buoyant

News Analysis Light Reading 5/19/2005

NICE, France -- TeleManagement World 2005 -- The world of telecom software is happy, hiring, and heading for a new spate of takeover deals, if the buzz on the show floor at this year's TeleManagement World show in the south of France is anything to go by.

And it's a busy floor. More than 2,400 people have visited 110 exhibitors and attended the conference sessions, says the show's organizer, the TeleManagement Forum, a near 20 percent increase from 2004 (see OSS Sector Shows Signs of Life).

So what's the hot OSS (operations support system) talk at this year's event? Appointments, departures, and potential acquisitions are the key talking points.

People power
In stark contrast to the dark days of 2001 to 2003, OSS vendors are hiring new staff to cope with what they see as increasing carrier activity and opportunities. Among the firms here at the show, Axiom Systems Inc., Cramer Systems Ltd., Incatel Ltd., NetCracker Technology Corp., and Sheer Networks Inc. all said they are upping their headcount this year.

"There are lots of positive signs for the industry, and a good indicator of the increasing health of the OSS sector is that companies are hiring," says OSS Observer analyst Larry Goldman, who also pointed out that "a lot more companies have hired meeting rooms and are involved in the technical showcases this year. They're doing that for a reason. It's a good sign."

The revolving door isn't just one way, though. Data integrity specialist CoManage Corp. is believed to have downsized before its recent acquisition by Syndesis Ltd., while one OSS giant has lost a key executive.

Telcordia Technologies Inc.'s president of wireless, cable, and emerging markets, Terry Vega, has left the company to join Motorola Inc.'s (NYSE: MOT) handset division. Vega, who joined in November 2002 after holding a broad range of wireless-related posts at Lucent Technologies Inc. (NYSE: LU), was one of CEO Matt Desch's key lieutenants and, according to one former Telcordia staffer, was very highly regarded within the company and tipped as the telecom software firm's next CEO.

Telcordia, which has long harbored ambitions to expand its wireless OSS business, has replaced Vega with another former Lucent wireless executive, Scott K. Erickson, one of the industry's most prolific conference circuit speakers. Telcordia, which announced a wireless OSS deal in China during the show, didn't return calls concerning Vega's departure (see Telcordia Touts Deals).

Merger murmurs
Following the (unofficial) news that IP provisioning specialist Syndesis has acquired CoManage, other significant takeovers are expected, with industry giants such as Telcordia, Amdocs Ltd. (NYSE: DOX), and Agilent Technologies Inc. (NYSE: A) at the heart of the scuttlebutt (see Syndesis Makes Its M&A Move).

Telcordia is again seen as a key mover and shaker now that its ownership issues have been resolved, and CEO Desch has stated previously his intentions to make acquisitions (see Telcordia D-Day Approaches, Telcordia Purchase Closes, Telcordia Craves M&A Warchest, and Who's on Telcordia's Shopping List?).

The company regarded as a potential target is wireless performance management specialist Vallent Corp., the new name adopted by Watchmark-Comnitel following its acquisition of ADC Telecommunications Inc.'s (Nasdaq: ADCT) Metrica wireless OSS business (see ADC Sells Metrica to OSS Rival and WatchMark, Metrica Renamed Vallent).

Telcordia is believed to have been interested in buying Metrica from ADC, but couldn't pursue such a deal while it was in the throes of being sold by Science Applications International Corp. (SAIC). A move for Vallent would give Telcordia the wireless technology and customers it craves, but OSS analysts and executives at the show believe such a deal would cost north of $200 million, as Vallent has such a dominating position in the market, counting hundreds of GSM and CDMA wireless operators as customers.

In addition, one industry analyst, who requested anonymity, said Vallent had put the For Sale sign up, and was welcoming takeover talks. Kieran Moynihan, general manager of Vallent's service management division, laughed off such suggestions and would talk only of ongoing business success despite Telcordia's ultra-competitive pricing. Telcordia, as we know, is silent on all these issues.

Another hot rumor is that billing giant Amdocs is considering a move for inventory management player Cramer Systems Ltd. Amdocs told a recent analyst conference that acquisition activity is one way in which it might use its current cash pile, and the company has already made one attempt to buy a leading inventory system firm when it lost out in a bidding war for Granite Systems (see Telcordia Nearly Blew Granite Deal and Telcordia Shells Out at Last).

Amdocs is already more than just the billing sector's leading vendor -- it has CRM, mediation, and service activation software products, too. Acquiring a resource management (inventory) system, which many carriers such as BT Group plc (NYSE: BT; London: BTA) and Telecom Italia SpA (NYSE: TI) consider the back-office lynchpin system as they shift towards IP-centric networks, would give it even greater influence in the telecom software market.

Amdocs' U.K. director, Neil Philpott, says he doesn't know anything about such rumors, noting only that Cramer is "already a partner, and we have some joint customers together already. We have a strong existing relationship, and we're planning a joint marketing campaign for next month's Supercomm event."

Cramer's corporate communications director, Robert Curran, says only that he "can understand why that rumor would be going around."

Last but not least, Agilent is rumored to be back on the OSS acquisition trail for the first time since it acquired Objective System Integrators Inc. (OSI) for the princely sum of $667 million in cash in 2001 (see Agilent Proceeds With OSI Merger). Donna Bastien, Agilent's OSS marketing manager, declined to comment on whether the company had M&A ambitions in the telecom software market.

What's in a name?
The OSS sector is always fertile ground for some, er, interesting company names, and this year's show brought a few more to our attention. For instance, in which other telecom sector would a company name itself Men & Mice?

And we can confirm that there is a girl from Ipanema Technologies, a French network optimization systems vendor. Her name? Béatrice Durand. We can't confirm, though, if she's "tall and tan and young and lovely." Maestro, play that song... News announcements made during the TMW show include:

— Ray Le Maistre, International News Editor, Light Reading