Desch Out at Telcordia

The new owners at OSS giant Telcordia Technologies Inc. have installed former Lucent Technologies Inc. (NYSE: LU) executive Dan Carroll as the new chairman and CEO, replacing Matt Desch effective immediately (see Telcordia Names New CEO).

Private equity firms Warburg Pincus and Providence Equity Partners acquired the company in March this year in a $1.35 billion deal partly funded by the sale of Telcordia's headquarters (see HQ Sale Funds Telcordia Deal).

Now they've replaced an ex-Nortel Networks Ltd. (NYSE/Toronto: NT) executive with an former Lucent man.

Desch, who remains in the neutered role of Non-Executive Chairman, presided over a time of considerable upheavel during his three years as Telcordia CEO (see Telcordia Names CEO). Not only did the company change owners, but Desch also brought in a number of new senior executives, made a significant acquisition in leading inventory management firm Granite Systems, and made a concerted effort to spread Telcordia's wings beyond North America. (See Telcordia Shells Out at Last, Telcordia Hires Terry Vega, Telcordia Targets Europe – Again, and Telcordia Opens Up.)

Desch also got very touchy about media coverage, a policy that failed to curb investor enthusiasm for the company's fortunes. (See Telcordia Leaves Legal Luggage, Inside Telcordia's Discord , Telcordia's Softswitch Timebomb, and Telcordia Prepares for Court.)

His removal will come as no great surprise to Telcordia watchers. As soon as the OSS company's previous owner, Science Applications International Corp. (SAIC), put the OSS firm up for sale last summer, Desch, who had spent three years trying to reorganize and reposition the company, saw the writing on the wall and protected his future with a 'Golden Goodbye' clause (see Telcordia CEO $trikes $ell-Off Deal).

"It's an obvious signal that Warburg and Providence have not been satisfied with the senior management team's ability to grow the business faster outside of North America and accelerate revenues in high growth segments like mobile," says OSS Observer analyst Patrick Kelly. "Matt has done a great job in changing the culture at Telcordia, but its investors need to see growth."

One former Telcordia executive was more damning. "Look at the track record -- it hardly makes for a wonderful resume... There are so many things that company should be doing, and it's not doing any of them. It has a massive installed base, and it has failed to make proper use of it. And clearly SAIC didn't think much of its prospects, otherwise they wouldn't have sold it.

"Telcordia has let down the whole OSS industry. The sector needs a big gorilla to aspire to, and to help pull up the valuations of the smaller companies. Telcordia should be that gorilla, but it's failing."

Carroll, naturally, is excited about his role. In the press release, the new CEO notes: "Given both its strong commitment to customer service, quality, and technical innovation and its recent evolution to an independent company, I am excited about the promising potential of the business."

But, like Desch before him, Carroll faces the tough task of managing a shrinking business as the firm's main customers, the RBOCs, renegotiate their OSS upgrade and maintenance contracts with Telcordia and turn more and more to other software suppliers for their back-office systems.

The most recent financials available before the company was acquired showed shrinking revenues, from $1.4 billion in its fiscal year ended January 31, 2002, down to $887 million for the financial year ended January 31, 2004.

As this article was published, our calls to Telcordia requesting an interview with Carroll, and enquiring as to the exact nature of Desch's new role, remain unreturned.

— Ray Le Maistre, International News Editor, Light Reading

Sign In