Ericsson will pay $1.15 billion (€803 million) to acquire OSS/BSS vendor Telcordia, in a deal expected to bolster its North American presence.
The deal includes around 2,600 Telcordia staff and should begin to have a positive impact on Ericsson’s earnings within a year of closing, which is expected during 4Q11. Ericsson is aiming to grab a larger slice of an OSS/BSS market it estimates was worth $35 billion in 2010.
Telcordia generated revenue of $739 million for the year ending in January.
Informa Telecoms and Media senior analyst Peter Dykes said the deal will substantially increase Ericsson's footprint in North America, but notes it is too early to say what impact the merger could have on the overall OSS market. “The fact that Telcordia was largely US-focused might go against Ericsson when trying to sell its wares in the rest of the world, as buying habits are notoriously difficult to change,” he said.
ABI Research principal wireless analyst Jim Eller predicts the merger will “support Ericsson's expansion into wireline - not for wireline’s sake, but primarily as the wireline portion of mobile networks.”
Both analysts note the deal is indicative of Ericsson's shifting priorities towards managed services, as a result of shrinking infrastructure margins and price pressures from vendors from the far East, particularly China.