The Village View

Friday, November 03, 2006

Thoughts on Oracle's MetaSolv acquisition

Basic Info
Deal Announcement: Oct. 23, 2006
Location: Plano, Texas (HQ)
Founded: 1992
Employees: 438

Sub Sector: Networks and services management software
Price: $219M
Closing: Q4 2006
Key Customers: AT&T, Brasil Telecom, British Telecom, Cable & Wireless, O2, Singtel, Sprint, Telstra, T-Mobile, UPC, Verizon Dominicana, various entities of Vodafone

Relevance of Operational Support Systems (OSS) for Telco
  • Operational Support Systems are network-facing systems that link the business applications (e.g. CRM) with the Telco network infrastructure enabling the execution of key services (e.g. new account activation, billing)
  • Combination of increase in number of telecom packaged service bundles with a shorter life-cycles for service offerings makes “time to service” and “order-to-activate time” increasingly important for Telecom providers
Products and Services of MetaSolv
  • MetaSolv supports network and services management with components for order management, inventory management, service activation, network billing mediation and device configuration management
  • Consulting for implementation and configuration, training and solution support form the service offering

Acquisition Rationale - Provide complete telecom solution

1. Another step in Oracle’s efforts to establish themselves in the Telecom vertical
  • Media & Telecom is the 3rd largest market by IT spend with significant opportunity for consolidation
  • Market size of $6.3B in 2010 (license and custom SW)
  • Carriers are expected to spend more than $10B each year from 2007-2010 in application upgrading (including license, maintenance and services)
  • Fragmented market with top 5 players holding less than 20% market share and no player providing end-to-end offer
  • Oracle aspires to become the #1 player in Telecom vertical with the expectation to reap “extraordinary” profits

2. Offer a complete solution stack for Telecom service providers
  • Oracle is completing its product offering with targeted acquisitions of niche vendors
    • 5 pure play acquisitions (Portal Software, MetaSolv, Telephony@work, HotiSIP, Netcall) in the last 2 years with total M&A investment of $0.5B, plus a share of $0.7B price of Times Ten and $3.6B of Siebel
    • Oracle pursuing an ownership strategy across the Telecom stack in order to reap the advantages of full stack integration
  • Pre-integrated solution will include OSS, Billing and CRM components
    • Will be provided as hosted offering and targeted to smaller 3rd tier providers at first
    • MetalSolv has ~10% market share in OSS and a fairly complete OSS solution, although it was perceived to be less competitive than Telcordia
MetaSolv was not Oracle’s first choice: it tried to acquire Cramer, but lost out to Amdocs

Thought this comment by the 451 group was interesting:
“MetaSolv began shopping itself in early August, after several months of discussions with possible acquirers. We understand it attracted at least one other interested party, although investors would be forgiven if they didn't necessarily see that fact reflected in the price Oracle paid”

I listened to the financial analyst call with MetaSolve after the acquisition and remember one analyst say he was "disappointed" with the sales price.


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