Ericsson (NASDAQ:ERIC) reached an all-cash deal on Tuesday worth $1.15 billion to take over telecommunications software maker Telcordia from a pair of private-equity funds, becoming the latest tech company to get into the M&A game.
Piscataway, N.J.-based Telcordia generated $739 million in 2010 sales and provides a range of networking and operations software. The company is best known for its suite of network management tools known as Next Generation OSS.
Ericsson is betting Telcordia will help it handle strong growth in mobile and fixed broadband traffic as well as from new devices like tablets.
It is a perfect fit," CEO Hans Vestberg said in a statement. Telcordia brings very skilled people and knowledge, a large business in North America and other markets, as well as a good multi vendor product portfolio."
As a part of the deal, about 2,600 employees from Telcordia are set to join Swedish-based Ericsson. Telcordia is owned by private-equity firms Warburg Pincus and Providence Equity Partners.
Ericsson said the market for software and systems integration is valued at about $35 billion in 2010 and expected to grow at between 6% and 8% through 2013.
Together, we will lead the way into a new era of converged communications, while expanding our offerings to manage the world's most dynamic networks, said Telcordia CEO Mark Greenquist.
Ericsson said it sees the deal adding to its bottom line within a year of closing. The companies expect the transaction to close in the fourth quarter, with the full effect being felt the following quarter.
Shares of Ericsson gained 2.40% to $14.07 ahead of Tuesdays open, leaving them on pace to build on their 2011 gain of about 19%.