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Genband CEO Sees Opportunity in a Complex Deal

Phil Harvey
LR Mobile News Analysis
Phil Harvey, US Bureau Chief
2/24/2010

Genband Inc. CEO Charlie Vogt says he's not surprised that his company's stalking horse bid to buy Nortel Networks Ltd. 's Carrier VoIP and Application Solutions (CVAS) unit went uncontested. (See Genband Wins Nortel's Carrier VoIP Biz.)

"Nortel's only getting $182 million, but there are a lot of other costs," he says.

The total cost
Genband expects to spend another $150 million in the next 12 months integrating the Nortel business. There are transitional costs, severance costs, and new IP infrastructure the company will need to acquire to bring the "hundreds of legacy IT systems" at Nortel in line with Genband's systems, according to Vogt.

"We've got a plan to have this thing fully integrated in the next 12 months," he says. And though his people only started integration planning about 30 days ago, he says they've been going over the scenarios for a while. "We've been staring at this business for 10 months."

Soon the company will appoint a chief integration officer whose job will be to focus on making the Nortel division a working part of Genband. And, at a media and investor meeting in May, Genband execs say, the company will officially roll out its product roadmap and vision for the future.

When the acquisition closes, likely in April, the new Genband will have about 2,200 employees, with a couple hundred full-time contractors and outsourced positions. At our last count, the Nortel CVAS business already had 1,638 employees, and Genband had about 450.

Vogt says Genband's acquisitive past is a help to taking on a project like Nortel's CVAS unit. "If you weren't a logical buyer and an able buyer, it was a hard one to swallow. The complexity of this business is monumental.

"It's not about the price, it's about the liabilities," Vogt adds, noting that when Genband bought Tekelec's switching business several years ago, that business was about four times the size of Genband.

Genband's convergence play
"We will be a very complete company as it relates to the fixed world both in traditional ILECs, CLECs, and cable operators," Vogt says. "But we're making great headway in the fixed/mobile convergence space.

"You'll never hear me say we're going to be this dominate player in the mobile world, but as it relates to fixed/mobile convergence, we're going to be positioned to do well in that space."

As far as Genband's partners go, Vogt believes the fact that they didn't participate in the bidding for Nortel's CVAS group "was their signal that they were happy to have Genband acquire this business."

Vogt says he sees Genband partners Ericsson AB (Nasdaq: ERIC) and Nokia Networks as wireless infrastcturure companies. He sees Alcatel-Lucent (NYSE: ALU) as an optical and IP routing powerhouse. Each one, he says, Genband will try to complement. "When I think of Genband, I think of an IP switching company. We'd like to convince the world that we're the best company to serve the world in IP switching."

That focus is a contrast to some large vendors, Vogt says: "Huawei is one of those companies that's trying to be everything to everybody… They're going to be the best at everything and you just can't, anymore.

"Genband is going to have the most comprehensive IP switching portfolio in the world. Maybe that means that more things get divested to Genband over time."

— Phil Harvey, Editor-in-Chief, Light Reading

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