Telecom vendor M&A heats up

Leave it to Cisco to kick things off, but its recent acquisitions of Starent and Tandberg seem to have kicked off a mini-trend of large vendors swallowing up upstarts to fill key technology holes.

Two deals hit today: Genband picking up the carrier voice-over-IP (VoIP) biz of Nortel and NEC expanding on its earlier deal to acquire Netcracker by moving all of its software assets under the Netcracker umbrella.

Looking back in time, we also have Tellabs picking up WiChorus last fall for its mobile packet core, Oracle earlier this month quietly buying Convergin’s TDM-to-IP gateway, as well as IBM swallowing operations support systems (OSS) specialist Intelliden.

What do these acquisitions have in common?

Each involves a large vendor buying up not a rival but a smaller vendor that has a key piece-part that won’t necessarily move its stock price but brings key new capabilities — or, more importantly, access to new markets and customers.

Such deals certainly aren’t new. But the string of them makes them notable, especially coming off a year when most vendors, large and small, strapped in for the ride and tried to survive the battered economy and shrunken carrier capex.

For Genband, its acquisition of Nortel’s VoIP business continues its expansion, moving it more clearly into the softswitch/session initiation protocol app server business. The Netcracker deal aims to create a more substantial, end-to-end OSS/BSS player that can compete with IT vendors such as IBM and large software players such as Amdocs or Telcordia, each of which went through their own wave of acquisitions to get to their current size and scale. 

Oracle’s recent deal to acquire Convergin flew well under the radar screen. Convergin’s core product, which helped telcos link legacy TDM networks to new application platforms via Web services, was perfectly suited to be eventually acquired by a larger platform vendor. Other vendors offering similar capabilities have also been bought up, including JNetX by Amdocs, while others, including Aepona and AppTrigger, remain independent.

IBM’s Intelliden deal also brings its best-of-breed technology (Hossein Eslambolchi, Intelliden advisor and former AT&T chief technology officer, also had a highly visible role in the company). Intelliden’s OSS software platform takes a real-time inventory of elements of a carrier network and drastically automates network management and ultimately service delivery. IBM will integrate the technology into its Tivoli Software Group platforms, positioning it to win network management deals for carrier multivendor IP networks, which require different types and levels of management and automation versus their legacy, often single-vendor networks.

Coming out of a downturn, consolidation and cherry-picking of assets isn’t unexpected. We’ll see if this represents the beginning of a trend that will carry on well through 2010.
An earlier version of this story appeared here.

E-mail me at richard.karpinski@penton.com.

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