The purchase price was $14.5 million in cash plus 780,000 shares of Tekelec common stock, for a total of $27.5 million based on Monday's closing price (see Tekelec Acquires VocalData). Tekelec stock rose 46 cents (2.75%) to $17.19 today.
For Tekelec, it's the fourth acquisition in six quarters, the others being Santera Systems Inc., Steleus, and Taqua Inc. The combination has amassed quite the VOIP arsenal for the former test-and-measurement vendor (see Tekelec Tests Softswitch Waters, Tekelec Splashes Out Again, and Tekelec Is Buying Taqua).
Analysts think the latest deal has promise. The deal is "a way for Tekelec to play in the emerging outsourced business VOIP market, while bolstering its next generation switching business with higher-margin revenue (70% range)," writes analyst Bill Gildea of Janney Montgomery Scott LLC in a note published this morning.
VocalData competes with BroadSoft Inc. and Sylantro Systems Corp. in VOIP applications development, an area that's key to service-provider adoption of the technology. "New applications are the primary reason service providers are moving to VOIP," says Kevin Mitchell, an analyst with Infonetics Research Inc..
But VocalData had yet to find stable ground. Despite amassing 50 customers, including NTT Comware and Telus Corp. (NYSE: TU; Toronto: T), the company was still in the red, with $4.8 million in revenues for fiscal 2003 but operating losses of $10.6 million, Deutsche Bank AG analyst Brian Modoff wrote in a report published last night.
VocalData claims a 34 percent share of all IP-centrex lines shipped, based on figures from iLocus, but Mitchell thinks the company could be losing ground to BroadSoft and Sylantro. VocalData's struggles are reflected in the $27.5 million price, well below the $60 million it had raised since 1998 (see VocalData Set for $15M Boost and VocalData Lands $12.5M). "VocalData needed money and needed a supplier that could handle big deals," Mitchell says.
Tekelec already owns part of BroadSoft, but that might not last if Lucent Technologies Inc. (NYSE: LU) acquires BroadSoft, as has been rumored (see Lucent to Buy Broadsoft? ).
That wouldn't be the only time a big company took Tekelec's lunch money. Lucent recently bid for Telica Inc., another startup in which Tekelec had a stake. And in the wireless realm, Tekelec's relationship with softswitch provider Spatial Wireless could be on the rocks, as Alcatel SA (NYSE: ALA; Paris: CGEP:PA) made a bid last week to buy Spatial (see Alcatel Lands Spatial for $250M and Alcatel in M&A Frenzy).
In that light, Deutsche Bank's Modoff sees the VocalData purchase as a form of insurance: "Given the potential changes in its long term relationship with Spatial Wireless (in light of Alcatel's plans to acquire Spatial Wireless), we believe [Tekelec] management is taking ... measures to address and strengthen the company's strategic long term IP/VOIP product offering."
— Craig Matsumoto, Senior Editor, Light Reading
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