Ericsson to buy software firm Telcordia for $1.15 bn

Sweden's Ericsson, the world's biggest mobile network equipment maker, said Tuesday it would pay $1.15 billion (796 million euros) in cash for US communications software developer Telcordia. Ericsson said the transaction was a key move in reinforcing and expanding the company's position in operation support systems and business support systems. The Swedish giant described Telcordia, based in the US state of New jersey, as a "global leader in the development of mobile, broadband and enterprise communications software and services." Currently held by private equity firms Providence Equity Partners and Warburg Pincus, Telcordia has about 2,600 employees who will transfer over to Ericsson. It generated revenues of $739 million in the fiscal year ending January. "The importance of operations and business support systems will continue to grow as more and more devices are connected, services become mobile and new business models for mobile broadband are introduced," Ericsson chief executive Hans Vestberg said in a statement. "Telcordia brings the good customer footprint, leading service fulfillment and service assurance and a strong presence in North America," he added in a conference call, describing the transaction as "a strong business case." Telcordia chief executive Mark Greenquist also hailed the deal. "The combination of Ericsson's global leadership position and Telcordia's long-standing expertise in solving the most complex communications challenges will benefit customers through new services and expanded capabilities," he said in the statement. Lars Soderfjall, an analyst with Aalandsbanken, told Dow Jones Newswires that Ericsson's acquisitions were "generally positive for its earnings." Bernstein analysts agreed, describing the deal as "positive for shareholders." "Ericsson can make a very profitable use of Telcordia's 2,600 employees and its global reach will surely improve Telcordia's growth potential," Bernstein said. Ericsson said the deal, which is still subject to regulatory approvals, was scheduled to close in the last quarter of 2011 and come into effect at the beginning of 2012. Ericsson shares closed up 1.66 percent to 88.70 kronor (9.70 euros, $14.05).