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Source: Telcordia Sends Out Feelers

Light Reading
News Analysis
Light Reading
7/28/2004

Telcordia Technologies Inc. CEO Matt Desch tried to keep his staff motivated and placated this week with an internal Webcast to employees, sources close to the company say. Unfortunately, as Telcordia is in the midst of shopping for a buyer and watching its business go through a tough transformation, the pep talk doesn't appear to be working.

Desch's decision to broadcast a "State of the Union" address came after last week's news that Telcordia's parent, Science Applications International Corp. (SAIC), was looking to offload its progeny (see SAIC May Sell Telcordia and Analyst Hears Telcordia Rumblings ).

Our main source, who communicated under the condition of anonymity, tells Light Reading that staff morale is at an "all time low" following the loss of nearly 6,000 jobs at Telcordia during the past few years. But confirmation Telcordia may soon have a new owner "just drove it further down."

According to that source, the CEO told staff he felt the need to respond to last week's news outing. Desch confessed that SAIC and Telcordia have indeed started looking for a "new owner" or "partner." However, the CEO also said that reports of an imminent auction for the company were "simplistic and misleading."

Instead, Desch says a "descriptive memo" detailing historical performance and the company's goals and objectives, had been created and sent to a number of potential suitors, but that no negotiations had yet taken place, according to our source. Talks are due within the next month, said the CEO.

While Telcordia focuses discussion on how its fate will affect its customer base, employees have a different concern. "Everyone is wondering what will happen to our jobs," says our insider.

Desch told staff that finding a new owner would be "a great thing" for the company, according to our source who viewed the Webcast.

Indeed, Telcordia is fighting a losing battle against its bottom line, with revenues drifting down on a quarterly and annual basis. For example, in the first quarter (ended April 30, 2004) of its 2005 financial year, revenues totaled $206 million, down 9 percent from $226 million for the same period a year earlier. And during that first quarter, the company took a $2 million charge against the "involuntary workforce reductions of 76 employees."

Not everyone thinks that having a new owner would be detrimental to Telcordia. Another source inside the company, who confirmed that the Webcast had taken place, said cutting loose from SAIC, which is "an incredibly risk-averse company," could be "liberating" for Telcordia.

That source says the current Telcordia management is being stifled by SAIC and is pushing the OSS firm as close to the edge as its board will allow. A sector sale could be "a blessing" for Telcordia, says source B.

As Telcordia's staff await the next Webcast, some of the newest members will be hoping that the online gremlins stay away next time, so they can get the latest news from the horse's mouth (so to speak). One source tells us that, due to a glitch with security settings, some of Telcordia's European contingent who joined as part of the recent Granite Systems acquisition were denied access to the Webcast (see Telcordia Shells Out at Last).

Telcordia, perhaps not surprisingly, declined to comment on anything. Anything at all.

— Phil Harvey, News Editor, and Ray Le Maistre, International News Editor, Light Reading

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