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Financial

Telcordia Pockets Patent Payment

The piggy bank at Telcordia Technologies Inc. got a little bit fatter this week as the vendor pocketed a patent infringement payment.

Yesterday, Marconi Corp. plc (Nasdaq: MRCIY; London: MONI) announced, as part of its trading update, that it was to pay a lump sum of $21 million to Telcordia to settle a long-running patent infringement dispute (see Marconi Provides Trading Update).

The payments had been set to be made over a three-year period and amount to $23.5 million, but the parties settled on a slightly smaller but immediate payment. "It was marginally in our favor to do it this way, and these days we have the cash to make that sort of choice," says a Marconi spokesman.

That cash position has come from Marconi's strategy of selling off its "non-core assets" to pay off its debts (see Marconi Closes In on Zero Debt).

Although the British vendor didn't provide any further detail yesterday, the infringement is one it inherited when it acquired Fore Systems in 1999, and relates to a Telcordia technology known as Dynamic TDM, or DTDM, designed to allow the transmission of data and TDM traffic from a single platform.

For Telcordia it brings in a lump sum that's much needed as its revenues continue to drop. In the first quarter of its 2005 financial year (ended April 30) it posted revenues of $206 million, down 9 percent from $226 million a year earlier.

In a document filed with the Securities and Exchange Commission (SEC), Telcordia's parent company, Science Applications International Corp. (SAIC), noted that the decline in revenue was "attributable to the maintenance and enhancement contracts with the Regional Bell Operating Companies (“RBOCs”) that were renewed at a lower price for calendar year 2004...

"As a result of the changes and continuing challenges in the marketplace, Telcordia’s customers, particularly the RBOCs, continue to reduce their contract spending and place significant pressure on Telcordia to reduce prices and accept less favorable terms on existing and future contracts. Competition for these services is increasing as certain software companies offer competing capabilities in certain areas and several of the RBOCs utilize their own information technology staffs."

That pressure looks to be continuing. "Loss of business from the RBOCs or other commercial customers in the global telecommunications market could further reduce revenues and continue to adversely impact our business," noted SAIC.

That's one of the main reasons Telcordia is looking to buy its way into new and emerging markets, including the acquisition of OSS firms such as Granite Systems Inc., which was winning business away from Telcordia in key accounts. SAIC's filing also noted that Telcordia paid $66 million for Granite, slightly lower than some earlier estimates of $75 million to $100 million (see Telcordia Shells Out at Last, Who's on Telcordia's Shopping List?, and Telcordia: Buy Buy or Bye Bye).

The declining revenues, and the threat of a potential massive outlay related to an outstanding legal case (see Telcordia Prepares for Court), have also spurred Telcordia on to maximize the full business potential of its patent portfolio. It was recently awarded a key softswitch patent that has already reaped some rewards (see Telcordia's Softswitch Timebomb and NewCross Licenses Telcordia Softswitch).

Telcordia couldn't say what its patent-related revenues were as this article was published.

— Ray Le Maistre, International News Editor, Light Reading

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