So how much did Oracle agree to pay for Tekelec?

And why? What’s Oracle up too?

Once the deal closes, will Oracle make job cuts in Tekelec’s Triangle area work force of some 1,000 people?

Neither software giant Oracle (Nasdaq: ORCL) nor Tekelec would talk about the price or possible impact on headcount when the deal was announced early Monday. Oracle did offer some insight into its second major foray into the telecommunications business, explaining to some degree how the Tekelec deal meshed with the recently announced $2.1 billion acquisition for Acme Packet.

To get better insight into the deal, The Skinny turned to international analysis firm Ovum.

Feedback from Dana Cooperson, vice president and practice leader for Network Infrastructure from the London-based firm, offers interesting expert insight.

Asked what he believed Oracle paid for Tekelec, Cooperson says an Ovum colleague estimates that the deal likely cost close to $1 billion.

As for layoffs, she says it’s typical for Oracle to find overlap in marketing and finance. So no one should be surprised if some jobs not directly related to customer support, product development and sales are lost.

After all, Oracle is buying Tekelec not only for its very specialized communications software and products that make networks” smarter but also for its wealth of intellectual property in routing and signalling. Both areas are new to Oracle, and Cooperson sees very little overlap between Tekelec-Acme Packet offerings.

The $1 Billion Estimate

“This is a really tough one to speculate on, since Oracle isn’t talking,” Cooperson said when asked about the cost.

“My colleague, Matt Walker, did some back of the envelop calculations, but is hesitant to share them as they could be wildly off. He simply notes that Acme Packet was bought for $2.1billion , a 22 percent premium over the market cap at the time [in] early February.

“Tekelec was taken private by Siris Capital for $780M in Nov 2011.

“Nasdaq is up 20% since then, and this market area [telecommunications] is hot now.”

What About Job Cuts?

“Very little overlap,” Cooperson explained.

“Oracle’s first foray into the telecom network was Acme, which still hasn’t closed. Tekelec is their second.

“Oracle is big in communications, but it’s been offline stuff like charging and databases and related, not actual network control of the type that Acme and Tekelec bring.

“There seems to be a bit of overlap between Acme and Tekelec in the area of Diameter Routing/Signaling, but very little otherwise. I don’t know what Oracle plans, but typically in acquisitions like this there is some overlap in corporate functions like marketing and finance but very little in products and services rendered to customers (engineering, product management.”

The Overall Picture

 Ovum believes that the Tekelec deal positions Oracle to become a big player in an evolving marketplace: A head-to-head matchup between information technology vendors and telecom focused vendors to find ways to help telecom vendors deal with growing customer bases and demand for mobile. With 4G LTE gaining international strength and mobile data of all types surging, telecom providers such as AT&T, Verizon Wireless, Sprint, T-Mobile and others worldwide are looking for ways to turn data into cash.

But they also face challenges even as usage grows. 

Principal Analyst Walker noted: “Network infrastructure vendor revenues – across mobile and wireline – declined 6 percent in 2012.”

So maximizing revenues from customers beyond standard contracts and usage is growing in importance. And companies such as Tekelec, which works with more than 300 customers worldwide and is an acknowledged leader in making networks smarter, proved to be a prime takeover target.

“The race is on between IT-centric and Telecom-centric vendors,” Ovum declared shortly after the Tekelec deal was announced.

On the IT side, Ovum sees HP, SAP and even Cary-based SAS as companies moving into the telecom space, especially where analytics might come into play.

On the traditional telecom service provider side are Alcatel-Lucent, Huawei, Cisco, Ericsson and others,

“Both are trying to help communications service provider (CSP) customers better manage and monetize their networks and the data they generate,” Cooperson explained.

“This acquisition further extends Oracle’s move into the heart of telecom networks. Tekelec will extend Oracle Communication’s network control capabilities, which it also bolstered with its February announcement to acquire Acme Packet. Tekelec also focuses on extending its service control solutions, adding policy control and subscriber data management to its list of capabilities. Oracle has in the past partnered to provide these capabilities, but by bringing them in-house it will have more opportunity to shape the roadmap and combine the capabilities in a more tightly-coupled solution.”

A Follow-on to Acme Buy

Cooperson sees other companies also looking to make buys that will enhance their telecom presence.

“The move provides further evidence of the key trends Ovum highlighted in the wake of the Acme Packet announcement: (1) the continued blending of telecom and IT; (2) software as the key driver of network capabilities; and (3) anytime/anywhere communications,” he explained.

“Expect Oracle’s telecom-focused competitors (Alcatel-Lucent, Huawei, Ericsson, etc.) and it’s IT-focused competitors (HP, SAP, SAS Institute) to do more strategic soul-searching and, as their financial situation allows, to pursue acquisitions of their own. Key areas for strategic shoring-up include customer experience management, applications enablement, big data analytics, subscriber data management, and network and service control intelligence.”

Walker sees more deals ahead, especially with “cloud” computing and software-driven changes in network infrastructure.

“The post-financial crisis bounce seen in many markets in 2010 and [the first half of 20111] is a thing of the past,” Walker said. “With prolonged economic turmoil and top-line revenue stagnation at the carriers, the industry is trying to right-size itself. Vendors slim down, refocus, partner, go private, merge – many options exist, but standing still is not an option.

“Margins have weakened for network infrastructure vendors in the last several quarters.

“Two beneficiaries of this market are Huawei and ZTE. While they both face political barriers, and ZTE is slimming down, the Chinese market is giving them a lift. Both of China’s big players face big risks, though, in software/IT particularly.

“All vendors are facing the rise of software, data centers, and the cloud, true. IT is increasingly being absorbed into communications networks, and big vendors without software/IT strengths may lose out, or be bought.

“While big mergers are hard to absorb, Oracle’s Acme Packet deal is a start,” Walker explained. “More telecom-IT crossover is coming, as witnessed by Oracle’s Tekelec plans.”

[TEKELEC ARCHIVE: Check out more than a decade of Tekelec stories as reported in WRAL Tech Wire.]