A billion-dollar assurance policy

Spirent plans to acquire Hekimian Hekimian found a suitor recently that will take it international, infuse it with packet-based technology and pay $1.58 billion for the pleasure. Spirent will buy the 32-year-old service assurance company from Axel Johnson for $712 million in cash and $863 million in Spirent stock.

Pending regulatory review and shareholder approval, the deal is expected to close before the end of the year. The proposed acquisition comes on the heels of U.K.-based Spirent's acquisitions of three U.S. companies: Zarak Systems and net-Hopper - both of which closed earlier this month - and InfoSOFT Technologies, which closed in September.

Hekimian provides its first in-service test systems to Spirent Communications, the operating group under which it will run. Other companies under Spirent's umbrella focus primarily on the lab environment.

Spirent gives Hekimian the packet technology knowledge it will need to survive in a non-TDM world.

"Five or 10 years from now, a huge percentage of services will be sold over some sort of packet infrastructure," said Dave Gellerman, vice president of corporate development and technology for Hekimian. "We looked at our competencies and our ability to bring solutions to the market and decided the best way we could help ourselves was to find a good source of packet service assurance technology to [work] with."

Market reach was also a priority. "Gaining access to that technology was a big key, but we were also looking for a company that would help us expand internationally," said Bill Duncan, Hekimian's vice president of marketing.

Spirent wanted to add some operations support system (OSS) breadth to its portfolio. Hekimian claims to have 300 current implementations of its service assurance systems in the North American incumbent and competitive carrier markets. More than 10,000 central offices use its test systems and access probes, which work in conjunction with its service assurance solutions. Together, these solutions give Spirent the in-service network test capabilities it was missing.

This will be particularly helpful to broadband access providers, said one analyst. "They have been able to lay the platform to offer service, but I don't think they quite anticipated the number of network management issues they were going to have to face," said Matt Davis, senior analyst for The Yankee Group.

And Spirent sees the very nature of network management changing.

"OSS will need different revenue models for next generation networks based on different levels of service. [So] real-time network monitoring will be required throughout the network," said My Chung, group president of Spirent Communications.

Chung will continue to lead Spirent Communications, which will consist of two business units: a new network monitoring division and the telecom test equipment division.

Des Wilson, Hekimian's president and CEO, will continue to lead the Hekimian management team and will report to Chung.

"One of the early approaches will be to take some of the leading-edge technology Spirent has in lab equipment - particularly in area of optical, IP and ATM measurement - and pull that into remote test probes," Duncan said.

While Spirent is moving into live network testing with its enhanced probes. "Spirent is not active in, and has no plans to enter, the field service testing market," said Nicholas Brookes, chief executive for Spirent.

In fact, Spirent hopes to eliminate the need for it. "The field will shrink considerably as faults can be detected and fixed remotely," Brookes said.

It's a good idea, but it won't be easy, Davis said. "I think all carriers have expressed a desire to minimize the amount of field testing they have to do," he said. "To be able to do all your testing from the network side is obviously the Holy Grail, but whether or not that can be accomplished is another question."

Axel Johnson has not lost all interest in Hekimian. The conglomerate will keep about a 12% share in Spirent.