The global game: DSC goes after Celcore's GSM line

Facing shrinking prospects in the analog wireless equipment market, DSC Communications moved to acquire Celcore last week to add a GSM switching component to its offerings.

DSC's current wireless switching portfolio includes equipment based on the AMPS and code division multiple access (CDMA) standards. Much of DSC's wireless switching business comes from Motorola, which integrates switches from DSC and other vendors into its network platforms.

But with digital deployment on the upswing, contracts for new analog equipment are likely to dry up within the next few years (see figure). Many consider GSM to have the best long-term growth prospects, particularly outside the U.S.

DSC wants to have a bigger play in the international market, said Allen Adams, senior vice president of business development at DSC. "This acquisition gives us a strong international product," he said.

Celcore's GSM platform is scalable and can operate with multiple radio subsystems. It is designed for the low subscriber density applications typical of emerging markets and can be deployed as either a mobile or fixed system.

"Our focus has always been to provide full-mobility networks for the emerging markets, but it's also flexible enough to be configured as a wireless local loop system," said Steve Chen, vice president of marketing at Celcore.

Adams pointed out that having a GSM component also positions DSC to develop equipment based on IMT 2000 standards now being developed, which are likely to be based on a hybrid of CDMA and GSM features.

One industry analyst agreed that the acquisition of a GSM strategy is a sound move for DSC given the international prospects.

"This could potentially double their chances of getting new contracts because the GSM market will be so large," said Clint McClellan, senior industry analyst at Dataquest. "It opens up brand new opportunities for them."

Under the terms of the agreement, which still faces regulatory approval, DSC would issue $165 million worth of common stock in exchange for all the outstanding shares of Celcore and assumption of the stock options of Celcore. Celcore will maintain its headquarters in Memphis.

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