Just What UC Needs: More Private Equity

by Dave Michels

Last April, rumors broke that Alcatel-Lucent was looking to exit the enterprise space by selling off its enterprise businesses including Genesys. I speculated then, and stick to it now, that Siemens Enterprise is a good suitor (Cisco too, but unlikely). Reuters reports that the current front runner is actually Permira. Permira is a European private equity firm that invests in “TMT” or Technology, Media, and Telecoms. Perhaps you recognize some of their other synergistic TMT investments:


Company name Investment Date Sector Country Transaction Size
Asia Broadcast Satellite (ABS) 2010 TMT Bermuda c.€180m
eDreams 2010 TMT Spain €250m+
NDS 2009 TMT UK €2,461m
ProSiebenSat.1 2007 TMT Germany €6,786m
Freescale 2006 TMT USA €12,604m
ALL3MEDIA 2006 TMT UK €531m
TDC 2005 TMT Nordics €13,400m
Seat PG 2003 TMT Italy €5,650m

Permira’s investment strategy is simple: “long-term investments in companies with the ambition of transforming their performance and driving sustainable growth.” That sounds perfect.

ALU has some valuable assets that could benefit with more aggressive management and vision, but Permira knows nothing about UC. Permira may indeed become the next big venture group to discover the complexities of UC.

Psssst: Want to Invest in Some UC? 

Over the past several years:

  • Cisco: Basically flat.
  • Avaya: Flat or negative  (private equity: Silver Lake)
  • Mitel: Negative (private equity: Francisco Partners)
  • SEN:  ?, but not up (private equity: Gores Group)
  • Microsoft: Flat
  • RIM: down.

Of course, there is more to the story and evidence of success does exist:

  • Aastra
  • ShoreTel
  • 8×8
  • Polycom
  • Interactive Intelligence

Though as I look at these two lists, the top one seems to represent a bigger portion of the industry than the second list. Plus I don’t see a lot private equity firms celebrating like its 1999 its 2010 after selling Skype.

Skype/Silver Lake is a great success story. But Skype is in a category by itself. ALUs enterprise efforts are in crowded sectors. Their best valuation will come from synergistic opportunities. I don’t see a lot of synergy with eDreams or Asia Broadcast Satellite.

This could be the best time to invest in UC. After several years of sluggish sales a potential economic recovery may be in the works, and a huge installed based of TDM and legacy VoIP are ripe for replacement.  But as with any acquisition, a key asset is the people. It’s a company’s employees that create value. At least when not on strike. ALU’s employees aren’t so hot on the idea of getting new business cards. Eugene Liu of InsideCTI reports:

Alcatel-Lucent unionized workers in France are jittery about a deal and have already staged a strike. French labor laws are a valid concern here. Just this will discourage bidders that aren’t experienced in dealing with European labor and unions. [Not to mention the bidders that are experienced with dealing with these unions].

The unions evidently feel long term employment is more likely being part of a company losing money that doesn’t want them. Reuters stated that Alcatel is asking for employment guarantees for its French staff. Suddenly seeking Sydney. (Sydney Harmon purchased the venerable Newsweek publication for a dollar, and assumed all of its commitments.)

I think Cisco or SEN still make the most sense. Cisco wants more call centers and doesn’t know what to do with its cash. ALU’s next generation switches can teach Cisco a few networking tricks too. Cisco could gain some market share, new technology, and eliminate a competitor. A large acquisition like this is not in Cisco’s character, and who knows how investors would react if Cisco tried something different.
SEN still makes the most sense from an overall fit perspective. Reuters reported that SEN/Gore attempted to bring in KKR as another investor. It would not be the first time Gores attempts to win with other people’s money. Evidently, the Gores group needs to conserve its cash to buy Borders. Can’t blame them there, everyone knows retail books are the future. If Gores wants another investor, and Permira has no UC experience, maybe they — ah never mind. At least the Borders employees will be happy.

See Related Post: http://www.pindropsoup.com/2011/04/alus-silent-auction.html