Amdocs Continues Spending Spree

With 2007 only three days old, Amdocs Ltd. (NYSE: DOX) has opened its wallet and further strengthened its billing and service delivery capabilities by acquiring the 86 percent of SigValue Technologies it didn't already own, for $54 million in cash. (See Amdocs Acquires SigValue.)

The move continues the consolidation trend set in 2006 that helped create a core group of über telecom software player giants that look set to dominate the OSS and service delivery sector in the coming years: Amdocs, IBM Corp. (NYSE: IBM), HP Inc. (NYSE: HPQ), Oracle Corp. (Nasdaq: ORCL), and Telcordia Technologies Inc. (See M&A Reshapes OSS Sector and Who Makes What: OSS .)

Further telecom software M&A deals, both large and small, are expected in the next 12 months. (See Is Telcordia Preparing for a Sale? )

So what has Amdocs -- which in 2006 bought OSS firm Cramer Systems, content download system vendor Qpass, and directories software specialist Stibo Graphic Software -- bought this time? (See Amdocs Snaps Up Cramer and Amdocs Buys Into Content Delivery.)

SigValue's key strength is an integrated billing, customer care, and data service delivery platform targeted primarily, though not exclusively, at mobile carriers operating in high-growth emerging markets such as Africa, Latin America, Eastern Europe, and Asia/Pacific, where the majority of wireless subscribers are pre-paid customers.

SigValue's system, called Value, was designed to keep operating costs down by integrating the key functions needed to manage and provision pre-paid services, including VOIP. The integrated system includes application server and media gateway technology, sourced from NMS Communications Corp. , that supports legacy voice and data protocols as well as SIP.

Its customers include Russian mobile operator VimpelCom Ltd. (NYSE: VIP) and Millicom International Cellular SA (Nasdaq: MICC) , which has operations in markets throughout Asia/Pacific, Africa, and Latin America. (See Millicom Tops 10M Subs.)

The Value system can also be used in fixed-line environments, where Bezeq, The Israel Telecommunications Corp. Ltd. (OTC: BZQIF) is a customer. (See Veraz Pushes VOIP.)

Amdocs's move comes as the mobile industry looks to the emerging markets for its next wave of growth, an expectation that is fueling a race to own assets in some key territories. (See Essar Offers $11B for Hutch Buyout, 2006 Top Ten: Emerging Trends, Moto Targets Emerging Markets, Emerging Markets Boost Ericsson, and Africa Racks Up Mobile Subs .)

Amdocs already owned 14 percent of the privately held six-year-old Israeli company, so it's buying the remaining 86 percent from the other shareholders, including VC firms Holland Venture and AIG Orion Venture Capital , for $54 million in cash.

The deal is expected to close before the end of March and be neutral to non-GAAP earnings in fiscal 2007 (ending September 30, 2007). Amdocs says, though, it may incur a one-time charge in the current quarter "to account for certain costs related to the acquisition."

The news sent Amdocs' share price down by $0.95, nearly 2.5 percent, to $37.81 today, giving the company a market capitalization of $7.8 billion. In its most recent full financial year to September 30, 2006, Amdocs generated net income of $319 million from revenues of $2.5 billion.

Amdocs had not responded to requests for additional details regarding SigValue's financials or the prospects for its 75 staff, as this article was published.

— Ray Le Maistre, International News Editor, Light Reading