END OF AN ERA SAIC purchase formalizes Bellcore's new charter >BY DAN O'SHEA, Technology Editor and JASON MEYERS, Wireless Networks Editor

The proposed sale of Bellcore to Science Applications International Corp. breaks the last formal tie that has kept the Bell companies brethren for the past 12 years, and it officially re-christens Bellcore as an independent software and professional services vendor.

The sale follows months of speculation about what entity would ultimately win Bellcore's affections, including a published rumor in September that SAIC was indeed the prevailing suitor. While the transaction still awaits months of approvals from Bellcore's seven owners and nine state regulatory agencies, the proposed marriage may be the best move for Bellcore and SAIC as change rips through their traditional industries.

"From a historical perspective, Bellcore has had a very captive market," said Sanjay Mewada, an analyst at The Yankee Group, Boston. "Only over the last few years have they turned themselves outward.

Likewise, most of SAIC's revenue comes from defense contracts. But as defense spending has dropped, the company has begun to pursue more systems integration outsourcing contracts and has broadened its work in the cable TV and Internet industries.

"For a company that relies so heavily on defense spending, that probably is a good reason to want to look beyond that," said John Malone, president of Eastern Management Group, Parsippany, N.J.

The sale should provide both agencies with more technology prowess to shed their traditional images and create new ones. "Both companies have very strong technical foundations," said Mewada.

With Bellcore under its wing, SAIC will look to expand its presence in the telecom arena. Bellcore will have much to gain from SAIC's connections and strength in areas where Bellcore has little background.

"We look to partnering with SAIC in areas where their experience in outsourcing and systems integration complements our in-depth knowledge of networking," said George Heilmeier, Bellcore's president and chief executive officer.

"This acquisition offers tremendous business opportunities to our combined firms. By joining our experience, we will better serve our combined customer bases," said Bill Roper, senior vice president and chief financial officer of SAIC. "We go from a telecom player to a world-class member of the team in one fell swoop.

Few specifics about the proposed sale were disclosed, but Bellcore's price tag is believed to be $600 million to $800 million. Also, Bellcore will be required to change its name within a year.

It is unclear how the two agencies will integrate their marketing, strategies and resources. In the last three years, Bellcore has essentially built a marketing organization from the ground up, recruiting marketing professionals from the likes of Alcatel, Nynex and other telecom industry stalwarts.

"We decided then that we were going to go after non-Bell company business, and our share of that business has grown 15% to 20% in the last three years," said Heilmeier in an interview with Telephony prior to the sale. "Our traditional applied research projects now make up only 6% to 7% of our business.

Pointing out Bellcore's growth as a software company, he said the agency has an installed base of more than 80 million lines of code worldwide, putting it in the same league with Microsoft and Lucent Technologies.

The combined SAIC/Bellcore braintrust is likely to paint itself as an open market competitive powerhouse. But the fact remains that neither company has a long history of savvy marketing skills.

"Organizational inertia is a very strong thing," said Mewada. "No one can transform overnight.