Optical/IP Networks

Syndesis: Will Amdocs Pop the Question?

Optical provisioning software vendor Syndesis Ltd. is rumored to be in line for acquisition by Amdocs Ltd. (NYSE: DOX), which makes customer care, billing, and order management software for carriers.

The rumor highlights the changing nature of the market for provisioning software, in which "who you know" is now just as important as "what you know." Faced with an ongoing reduction in carrier capital spending, makers of provisioning software are finding their best hope of staying alive is to grab the right partner, even if it means losing independence.

Rumors of a stronger alliance between Amdocs and Syndesis have been afoot for weeks, amid speculation that Amdocs may be out to buy other companies as well -- including Metasolv Software Inc., which also makes customer care and management software. But a recent restructuring at Syndesis seems to have augmented the focus on an Amdocs/Syndesis pairing. There's even a figure of $177 million being bandied about.

Amdocs refused to comment. As for Syndesis: "The rumor doesn't surprise us. We've been working closely with Amdocs for awhile, and we have a great deal of respect for them in the marketplace," says V. J. "Ginny" Dybenko, vice president of marketing and partnerships at Syndesis (see AmDocs, Syndesis Announce Partnership).

As to the validity of the rumor, Dybenko won't confirm or deny it. But she acknowledges that Amdocs has been in acquisition mode -- as evidenced by its purchase of customer relationship management software maker Clarify earlier this month for $200 million. "We'll have to wait and see what happens over the next few months," she says.

If the deal materializes, it could be a good match for privately held Syndesis. Amdocs has long been a key player in the carrier software market, and its quarterly report in July showed earnings per share of $0.33 on revenues of $404 million, an increase of 36 percent and 43.5 percent over last year's revenues and EPS, respectively. And with a market cap of $6.44 billion and current share price of $28.95, things seem to be looking well for Amdocs.

Syndesis, meanwhile, seems to have been preening itself for a suitor, regrouping and refocusing its product line in light of the ongoing downturn in carrier capital spending.

For a couple of years, Syndesis pitched high-end, highly customized provisioning systems to OEMs and any and all carriers. It partnered with the likes of Alcatel SA (NYSE: ALA; Paris: CGEP:PA), Cisco Systems Inc. (Nasdaq: CSCO), Lucent Technologies Inc. (NYSE: LU), Siemens AG (NYSE: SI; Frankfurt: SIE), and Sycamore Networks Inc. (Nasdaq: SCMR) to create tools aimed at helping service providers provision services based on multiple vendors' gear.

Now carriers have curtailed spending on new broadband gear. So Syndesis's ability to autodiscover equipment -- the basis for any good provisioning system -- is now being peddled as an end in itself. "We help carriers find what's actually in their networks, stranded equipment. In one case, we found OC3s the service provider didn't even know existed," Dybenko says.

It's a strategy that depends on partnerships with billing, operations support systems (OSSs), and integrators, because once the gear is found, carriers want help making the most of it. Enter Amdocs, as well as a slew of other companies, including technology consultants Accenture (NYSE: ACN) and Cap Gemini Ernst & Young.

Syndesis's new tack also has resulted in some internal changes, reflecting the company's new approach to the carrier market. In June, the company got a new CEO, John Lochow, a former executive VP at reseller Tech Data Corp. (Nasdaq/MMS: TECD). Founders Neil Baimel and Doug Chapman are taking on "more consultative" roles. And in September, the company laid off roughly 15 percent of its workforce, eliminating many jobs in the corporate side of the house.

Does Syndesis's new direction signal change in the business of provisioning software? In some ways, yes, say competitors. "What we do is one piece of the puzzle, albeit a vital one," asserts Russell Rothstein, VP of strategic development at HarmonyCom, another provisioning vendor. There's certainly a trend to combine the pieces together via strong parterships, he says.

For its part, HarmonyCom has teamed with Cisco to develop a subscriber management and provisioning package for that vendor's gear. The business it gains from the alliance should help it survive the shifts in the market.

Other provisioning vendors acknowledge that carriers are getting more demanding: "They want to see the money, they want to see exactly which manual processes will be replaced. You have to prove the case. The model is much tougher," says a spokesperson for Emperative Inc., which also offers provisioning tools for multiservice broadband nets. But he says the focus on ROI and dollars saved isn't necessarily a new one for this market sector.

The immediate issue is clear, for Syndesis at least: "We intend to survive all this," Dybenko says.

— Mary Jander, Senior Editor, Light Reading
jbuggy 12/4/2012 | 7:39:26 PM
re: Syndesis: Will Amdocs Pop the Question? Syndesis looked good when the CLECs and DSL wholesellers had a pulse. They've got a declining business. Couldn't deliver on SONET and DWDM.
qualitycheck 12/4/2012 | 7:39:25 PM
re: Syndesis: Will Amdocs Pop the Question? jbuggy, your point's well taken. but you sound like one of the 15% let go. Axe to grinde?

Lots of rumors floting around of all kinds of OSS consolidation, some of which are true. As far as Amdocs going after Syndesis... one I have heard, but an not inclined to believe for 2 reasons: 1- Syndesis touches the network for provisioning/activation. Amdocs is on the Billing/Customer Care side of OSS and should stay there. Touching the network is a whole other ball game and Dox has limited experience here. Plus Dox has many partners for activation. I don't see what it would get out of Syndesis, Emperative, Harmony or other activation engine. 2- Syndesis is too expensive. OSS companies are going at 1-2x revenue these days. $177 million is much more than 2x for Syndesis. If Amdocs does see benefits that I can't see, this deal will be done early next year. Investors need some space between the Clarify transaction and a new deal.

to make it's cash-flow position more attractive, I've heard Syndesis may consider trimming off another 25% of the staff. It may be a cold winter in Toronto!
twoorthreecents 12/4/2012 | 7:39:25 PM
re: Syndesis: Will Amdocs Pop the Question? LR...good job branching into the OSS world, not usually your strength. I've always considered you wanna be box heads. Nice to see you're ahead of the curve in the OSS too! We're all expecting these players to recover quicker than the dozens and dozens of ailing box vendors. Of course, before and during recovery there will be consilidation opportunities.
mastertirks 12/4/2012 | 7:39:24 PM
re: Syndesis: Will Amdocs Pop the Question? Anyone know much about Emperative? Is it as much of a pain in the @#$ to deploy as Syndesis? I don't know anything about Harmonycom.
cwacaser 12/4/2012 | 7:39:23 PM
re: Syndesis: Will Amdocs Pop the Question? I am a regional sales manager at Emperative (hence the bias), but we believe we are much easier to deploy because we are java-based instead of C++ and employ a unique state-machine architecture. We are able to develop new interfaces to NEs in 4-6 weeks instead of months. Contact me at [email protected] if you would like more info.
mumbogumbo 12/4/2012 | 7:39:21 PM
re: Syndesis: Will Amdocs Pop the Question? >1- Syndesis touches the network for >provisioning/activation. Amdocs is on the >Billing/Customer Care side of OSS and should >stay there. Touching the network is a whole >other ball game and Dox has limited experience >here. Plus Dox has many partners for activation.

Quick correction, AMDOCS tried to buy Architel back in 1999. So by precident, they might be interested in an activation company.

qualitycheck 12/4/2012 | 7:39:20 PM
re: Syndesis: Will Amdocs Pop the Question? >>1- Syndesis touches the network for >>provisioning/activation. Amdocs is on the >>Billing/Customer Care side of OSS and should >>stay there. Touching the network is a whole >>other ball game and Dox has limited experience >>here. Plus Dox has many partners for activation.
>Quick correction, AMDOCS tried to buy Architel >back in 1999. So by precident, they might be >interested in an activation company.

Architel is voice activation tool purpose-built for the Nortel DMS, right? If they do have branches into other parts of the network, why didn't Amdocs take them when they got Clarify?
mumbogumbo 12/4/2012 | 7:39:18 PM
re: Syndesis: Will Amdocs Pop the Question? Actually, according to the press release at the time, Nortel bought Architel b/c of it's data provisioning and activation capabilities.

Architel's ASAP is a very similar product to Syndesis.

AMDOCS had a deal on the table for Architel back in 1999 but it went bad. Nortel then picked up Architel.

I guess, one could speculate that AMDOCS didn't pickup Architel with Clarify b/c of past history. Or one could speculate that the price wasn't right. Or one could speculate the Syndesis rumors or part of their negotiation strategy.

i don't know...
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