Tekelec to secure third leg of convergence strategy with acquisition of Steleus

Signaling and switching provider Tekelec continued its growth-through-acquisition strategy last week by agreeing to acquire global performance management company Steleus.

Tekelec will pay approximately $56 million for Steleus when the deal closes in Tekelec’s fourth quarter. Tekelec will pay approximately $29 million in cash and $27 million in company stock.

Steleus, based in Westford, Mass., and Lyon, France, provides real-time performance monitoring solutions to telecom providers and to GPRS-based mobile operators and voice-over-IP providers in particular. It will now become the driving force in Tekelec’s new Communications Software Solutions business unit.

Steleus president, CEO and chairman, Richard Mace, will head the new business unit, which will be headquartered in North Carolina. Steleus employs approximately 150 people, mostly in France. It currently has about 15 people in the U.S. and some in India. Tekelec will add 50 to 100 people to create the new 200-person business unit.

Tekelec’s other two units are Switching and Signaling. Tekelec acquired softswitch vendor Taqua in April of this year and Santera in June of 2003.

"I believe that Steleus brings performance management capabilities that provide a competitive differential that when bundled with our switching and signaling products gives us a real value proposition," said Fred Lax, president and CEO of Tekelec.

Steleus serves about 100 operators in more than 35 countries. The company had $20 million in revenue in 2003, according to Mace. He expects the deal to be delutive to Tekelec for the balance of the fourth quarter, but accretive afterwards. "That translates into effectively achieving profitability very soon," Mace said.

The companies have worked together for almost two years and recently sold their bundled services into TelMex. They also have some joint customers in different market tiers.

"Tekelec has been focused on the Tier 1 market and has been moving into Tiers 2 and 3. Steleus has been moving from those Tier 2 and 3 markets into Tier 1, so the combination is complimentary," Lax said.

Steleus also has recently entered into strategic partnerships with OSS vendors such as Telcordia. Lax said that given both company’s relationships with Telcordia, he only expects the relationship to grow.

Lax also said that the company will continue to pursue growth in the value-added applications market anchored by Steleus. "The addressable market for software applications is about $2 billion. What we have now in products and applications from Steleus addresses about one-half billion dollars. So we see the opportunity to develop further applications either organically, through partnerships or other means," he said.