Comptel Looks Like the Start of Nokia Software Spending Spree
Nokia is excited. It previously announced plans to build a significant standalone software business by pumping up its Applications & Analytics unit, and has backed up its words with actions in the form of a 347 million cash bid to acquire fellow Finnish firm Comptel, a communications sector software specialist. (See Nokia to Create Standalone Software Biz, Target New Verticals.)
You can check out the details of the bid and some excellent analysis of the relative financials by my colleague Iain Morris in Nokia Eyes Bigger Software Role With 347M Comptel Bid.
Some industry analysts have weighed in too. (See Nokia's Buying Comptel: What the Analysts Say.)
But does the deal make sense?
On the face of it, yes. The two companies know each other and have worked together to deploy their relative technologies at a number of operators. Comptel is a steady company with a reliable revenue stream, its financials have improved recently, and in the area of service orchestration in the telco cloud environment, and in real-time analytics in the mobile BSS market, has some capabilities that will give Nokia some good stories to pitch to customers. There doesn't appear to be much product overlap but Comptel doesn't appear to be bringing much in the way of new customer accounts either.
But acquisitions are hard to pull off: The telecoms industry M&A road is lined with crash victims.
And growing a comms industry software business via acquisitions is something that Ericsson has been throwing money at for a number of years now: That has resulted in greater market share but that part of Ericsson's business has not blossomed as it had hoped and doesn't appear to have given it any advantages in the critical MANO (Management and Orchestration) sector, where Amdocs has staked a particular claim to fame by being AT&T's buddy in its ECOMP (Enhanced Control, Orchestration, Management and Policy) project.
Nokia isn't saying that it will build this software business through M&A activity alone but if it is going to scale up any time soon then more acquisitions will be inevitable -- that will add revenues and skills and products but also add cost, complexity and (as so often happens with acquisitions) cause a modicum of confusion and create opportunities for aggressive rivals. The Nokia team says it will engage in further opportunistic M&A when and where it makes sense and this isn't the first time it has much such a move, of course -- about a year ago it acquired Nakina, so it has been through something that is vaguely similar (though smaller and not publicly listed) in recent times. (See Nokia Snaps Up Nakina.)
And you can bet your albondigas (I'm getting in the mood for MWC...) that Amdocs, Ericsson, Oracle, IBM, NetCracker and others will be in a frenzy today, looking at what this means, what might happen next and how they need to respond.
In the meantime, I expect Nokia already has its next target lined up. Before it makes its next move, however, it needs to close the Comptel deal -- that's now in motion, with today's announcement, but it isn't a done deal. Without any hold-ups, it's due to close during the second quarter. But a rival bid could come in and there appears to be at least a hope amongst investors that this might happen as Comptel's share price closed today on the Helsinki exchange at 3.07, slightly above Nokia's bid price. Key Comptel investors have already agreed to accept the Nokia cash bid, but if a higher rival bid comes in, the Comptel board is obliged to consider it.
So at least for a few weeks it will be what's known in UK soccer circles as squeaky bum time for the teams at Nokia's Applications & Analytics unit and the folks at Comptel, most of whom have been told very publicly that their jobs are safe.
And if the deal closes there will be some very close attention paid to exactly how it plays out -- and what happens next.
Ray Le Maistre, , Editor-in-Chief, Light Reading
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