Feb 25, 2004 12:00 PM,

Tekelec confirms Taqua acquisition

By Vince Vittore

Tekelec today announced that it has signed a definitive agreement to purchase Taqua for $85 million in cash plus the assumption of Taqua’s outstanding options.

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The deal, expected to close within the next 60 days, will give Tekelec what it believes is the largest market share of deployed softswitches used in class five replacement applications. According to Fred Lax, president and CEO of Tekelec, about 70% of the existing softswitch deployments handle less than 5000 lines, where Taqua is strongest. Infonetics Research today announced that Taqua increased its share of the class five packet switch market segment to 32% in the fourth quarter 2003 from 25% in the first quarter last year.

"With this transaction we have significantly advanced our product portfolio," Lax said this afternoon in a conference call with investors and analysts.

The acquisition also is the second significant move by Tekelec into the softswitch market. Last year, the company acquired Santera. Taqua will be combined with Santera into a switching unit. However, both groups, which operate in the greater Dallas area, will operate within Tekelec as individual sub-units and maintain separate leadership teams. Charlie Vogt, president and CEO of Taqua, will continue leading his group while former Santera CEO Dave Heard will continue in his role.

"When we will report results on our earnings calls, we will report our combined results of our [combined] switching unit," Lax said. "Those [sub]-units are going to be led individually at this point in time."

The rationale for not combining both groups is that they address distinct markets, Lax said. While Taqua has been targeting class five replacements almost exclusively in the independent telco and competitive local exchange carrier market, Santera has been gaining traction with larger players as well as with the wireless market.

"The focus from a Santera perspective is not going to change," Lax said. ""Taqua is a highly customized, built-for-purpose switch, primarily for the small end [market]."