M&A Activity Picks Up

Nokia to Use Symbian in Open-Source Play
By Tara Seals

Nokia plans to give RIM, Google and Microsoft a run for their money with its $411 million acquisition of mobile phone operating system developer Symbian, announced in June. As a result, Nokia will create an open-source OS, much as Google is doing with its now-delayed Android.

The deal pits Nokia, the world’s largest handset maker, against the likes of Windows Mobile and promises to upend the mobile business model. That’s because Nokia intends to offer its open-source Symbian software royalty-free to handset makers, including Motorola Inc., Sony Ericsson and Samsung.

"This is seen as a strategic move to stave off competition from Apple, RIM, Windows Mobile, upstart LiMo (Linux Mobile Foundation), and Google's Android and to position Nokia as more than a Mobile Phone Company,” said James Brehm, a senior consultant for Frost & Sullivan. “Nokia will now own relationships with all of the big five handset manufacturers and a tremendous developer ecosystem."

ABI Research Director Kevin Burden said Nokia might be planning to position the Symbian platform for mid-tier devices with another platform powering high-end devices. Sony Ericsson does this now, he pointed out. Nokia already owned a 47.⁹ percent share in Symbian. It bought the remainder from Panasonic, Ericsson, Sony Ericsson, Siemens and Samsung. The acquisition should close in the fourth quarter. All Symbian employees will become Nokia employees, Nokia said.

NEC to Acquire NetCracker
By Tim McElligott

Given the fate of mid-tier independent software vendors over the last three years — those at the $100 million mark or more — it was a matter of when, not if, Waltham, Mass.-based NetCracker Technologies would be acquired. The “when” happened earlier this summer as NEC Corp. announced its intent to acquire the company for approximately $300 million.

NetCracker, which recently had reached the 1,000-employee mark, has been part of some of the industry’s biggest OSS transformation projects and has several Tier 1 customers, including France Telecom, Sprint, Telstra and UPC Broadband. “NetCracker has distinguished itself with a record of successful OSS transformations and exceptional software solutions and professional services for leading communications service providers,” said Kaoru Yano, president of NEC, in a statement. “The acquisition of NetCracker strengthens NEC’s offerings and brings even greater value to the global communications industry.”

After the close of the acquisition, which was expected by August, NetCracker will operate as a wholly owned subsidiary of NEC and act as an independent company with its current management infrastructure in place, said Andrew Feinberg, CEO of NetCracker.

It also expects to retain its entire employee base. The companies first will begin integrating their sales organizations as their go-to-market strategies. “We plan to integrate at every level over time,” Feinberg said. “There is a natural fit with NetCracker’s OSS and NEC’s IMS solutions, as well as vertical solutions such as VoIP, IPTV and others for which we have well thought-out strategies for how that integration might take place.” NEC is a global network expert with revenue of more than $40 billion and more than 155,000 employees. Feinberg said it has a long history of innovation and is committed to technology with its $3 billion R&D budget. The company anticipates that OSS will represent a key element to new international growth that is expected to generate approximately 200 billion yen over the next five years.

“There is no doubt the company faces growing pains,” said Elisabeth Rainge, program director of network software at IDC. “Going past the 1,000-employee mark and scaling past the customer base they have — which they seem quite capable of doing — is actually logistically hard to pull off. So the structure of the company needed to change.”

Rainge said the deal has more in common with Alcatel-Lucent’s partnership with Amdocs’ Cramer division or its acquisition of Motive than it does the acquisitions of similarly sized competitors such as Granite Systems by Telcordia, MetaSolv by Oracle, Cramer by Amdocs or even Syndesis by Subex.

“Moving up into the service layer and the business layer is increasingly table stakes for the network equipment manufacturers,” she said.

She added that it’s clear simple monitoring and configuration of network equipment is no longer adequate. “NEMs are increasingly getting shut out of big equipment deals if they do not have an OSS portfolio,” Rainge said. “This makes NEC’s move a little bit tactical, but ultimately strategic.”

Focusing on his company’s reputation in large transformation projects, Feinberg said the acquisition makes his company stronger in that regard. “As carriers go through these massive transformations to become service providers rather than the network and access providers they have been ... OSS and service fulfillment become an absolutely critical strategic component of those transformations.”

Feinberg also cited the geographic benefits of the merger. NEC is strongest in Asia and Latin America, while NetCracker is strong in North America and Europe, albeit in quite different verticals for now.

As for the reaction of its existing partners, Feinberg said: “We have spent a lot of effort building our channels. Some of those partners who are direct competitors with NEC may choose to no longer be part of our ecosystems, but many of our partners have significant relationships with NEC and this acquisition will accelerate those relationships.”

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