Telcordia Up for Grabs Again?

OSS giant Telcordia Technologies Inc. is rumored to be in takeover talks with German software firm SAP AG (NYSE/Frankfurt: SAP) less than two years after being acquired by two major private equity firms.

The news comes as an appeal court in South Africa found in Telcordia's favor in the OSS firm's long-standing legal battle with national carrier Telkom SA Ltd. (NYSE/Johannesburg: TKG). More on that on page 2.

Acquisition speculation
According to a report issued by specialist publication Vanilla Plus, Telcordia and enterprise resource planning (ERP) giant SAP are in discussions regarding an acquisition that would cement an existing relationship.

Telcordia representatives could not be reached for comment, while a SAP spokeswoman says she is not aware of any such talks.

If SAP makes a move, though, it will likely need to stump up significantly more than the $1.35 billion that Providence Equity Partners and Warburg Pincus paid for Telcordia in March 2005. (See Telcordia Purchase Closes and HQ Sale Funds Telcordia Deal.)

Since then, Telcordia has broken into important new markets, such as service delivery platforms (SDPs), IMS (IP Multimedia Subsystems), hosted MVNOs (mobile virtual network operators), and India. It has also formed a strategic alliance with global systems integrator Accenture . (See HP, Telcordia Hop SDP Bandwagon, OSS Firms Jump on IMS, Telcordia, Accenture Deliver OSS, Telcordia Wins Mickey Deal, and Telcordia Forms Indian Unit.)

It has been making better progress with the new network inventory capabilities it gained through the acquisition of Granite Systems, and was named as the market leader in inventory, network resource management and service fulfillment by industry analysts at OSS Observer . (See Telcordia Enhances Its OSS and Telcordia Boasts Market Leadership.) Telcordia's position in the SDP world makes it an attractive target for large enterprise software firms looking to capitalize on carriers' needs for new back office capabilities, believes Heavy Reading analyst Caroline Chappell.

In a recent Light Reading Services Software Insider report, "SDP & IMS: Changing the OSS Landscape," Chappell noted that services competition from the likes of Google (Nasdaq: GOOG), eBay Inc. (Nasdaq: EBAY), Yahoo Inc. (Nasdaq: YHOO), and media companies requires changes in the carriers' IT capabilities.

"If telcos are to compete as service providers against competitors from other industries that have already integrated and automated IT systems based on the ERP model, they urgently need similar systems of their own. The race is on for an OSS vendor to become the SAP of the telco market." (See IMS, SDP Revolutionize OSS.)

Chappell took that view a step further, noting that ERP vendors are likely to buy their way into the SDP sector through acquisition.

Such a move by SAP would not be against the current OSS acquisition grain, as many of the largest telecom software acquisitions of the past few years have been made by large IT and software companies looking to increase their presence and product portfolios in the telecom sector. (See Oracle Buys More OSS With MetaSolv, Oracle Acquires Portal, CA Makes Wily Acquisition, and IBM Tiptoes to Telecom With Micromuse.)

SAP already has a significant place in service provider back offices, mostly as a provider of its supply chain management and ERP tools, and claims to have more than 80 percent of the world's Top 500 carriers as customers.

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