METASOLV STEALS ITS WAY INTO LUCRATIVE TIER 1 MARKETS

Nortel sells remainder of its OSS assets for a song

The roughly $130 million in cash reserves MetaSolv Software has maintained for the last year finally burned a hole in CEO Jim Janicki's pocket. The independent software vendor paid about $35 million last week for most of Nortel Networks' remaining OSS software assets.

The most significant asset is Architel, the activation software business Nortel acquired in July 2000. Combined with Nortel's sale of Clarify to Amdocs announced in October (Telephony, Oct. 8, page 14), the software divestiture brings Nortel's OSS play to an end.

In addition to Architel, MetaSolv acquired Nortel's Objectel inventory system, service-level management solutions and billing mediation software. “It was a much bigger portfolio than we expected,” Janicki said.

Experts say it is the right move, but putting it all together is easier said than done. “It's a good deal for MetaSolv as long as they can manage all the challenges,” said Scott Donahue, program manager of OSS competitive strategies for Stratecast Partners.

MetaSolv is in the process of upgrading customers to its latest software release (Version 5.1) and integrating the software from its July acquisition of Lat45 Information Systems, a Montreal-based company that develops geospatial software.

“This Nortel acquisition adds to the list of things they need to get done, and it's a very aggressive list,” Donahue said.

Just as important as expanding its software menu is the leap in market exposure and a solid revenue stream. MetaSolv secured a three-year reseller agreement whereby Nortel would continue to sell its divested products for MetaSolv. The agreement has a $5 million revenue commitment.

Nortel's product lines also give MetaSolv instant access to more than 100 Tier 1 and Tier 2 carriers worldwide. Avoiding the pitfalls inherent with global expansion will be critical for MetaSolv, which is known for its focused business plan.

In addition, industry observers will follow closely the effect of MetaSolv's product expansion on its partnerships. Like many software vendors, MetaSolv built its business by providing a niche solution and interworking with partners to address myriad other OSS issues. But the market has changed, and so must MetaSolv.

“It's a good move for MetaSolv because they were going to go nowhere without doing something dramatic,” said Larry Goldman, senior service fulfillment analyst for RHK.

But the product expansion could produce some drama in its relationships with partners, some of which are now competing service activation companies that may have less incentive to finish building interfaces for MetaSolv's M5.1 software.

“The more comprehensive your product becomes, the more difficult it is to partner with certain companies because there tends to be a lot of overlap,” said Curtis Begley, president of North American operations for Orchestream, which specializes in service activation and service-level management.

But the lure of MetaSolv's exposure to Tier 1 and international markets might be too enticing for existing partners to walk away from their relationships, despite the strain of competition, according to analysts. Begley, for one, said he expects his company will continue pursuing a partnership with MetaSolv.

“We will find places we can work together,” Begley said.

RECENT OSS DEALS

Date announced	Buyer	Seller	Deal	Price	Original acquisition
Jan. 22	MetaSolv	Nortel	MetaSolv buys Architel and Objectel along with SLM and mediation software	$35 million in cash*	Nortel acquired Architel for $395 million in stock
Dec. 23, 2001	CSG Systems	Lucent	Cable billing provider CSG buys Kenan Systems	$300 million	Lucent acquired Kenan three years ago for $1.48 billion in stock
Oct. 2, 2001	Amdocs	Nortel	Nortel buys Clarify, Nortel's CRM business	$200 million in cash	Nortel acquired Clarify in March 2000 for $2.1 billion
*Approximate
Source: Companies