Gadget NEWS >> Ericsson Buy Telcordia for $1.15 Billion

Ericsson Telcordia

Telefon AB LM Ericsson, the world’s largest maker of equipment for mobile-phone networks, said it has agreed to buy privately owned telecommunications-software company Telcordia Technologies Inc. for $1.15 billion, a deal that will help it manage the explosive global growth in smartphone and broadband-Internet use.

Ericsson Chief Executive Hans Vestberg described Telcordia as a “perfect fit” in a statement Tuesday. Piscataway, N.J.-based Telcordia provides software and services to fixed-line and wireless carriers, helping them manage their networks more efficiently. Growing demand for high-speed data networks that carry mobile and Internet traffic have put telecom companies in a sweet spot as the economy recovers. In October, buyout firm Carlyle Group bought Syniverse Holdings Inc., another provider of mobile network technology, for $2.6 billion.

Telcordia, which began as Bellcore, providing software to the seven regional Bell telephone operating companies before being sold to SAIC Inc., also owns technology that allows phone-service providers to track billing and activate new services, although that is considered a “legacy” business.

The Wall Street Journal reported in January that Telcordia‘s owners, private-equity firms Providence Equity Partners and Warburg Pincus, had put the company up for sale. The private equity firms bought Telcordia from SAIC Inc. in 2004 for $1.35 billion. Telcordia earned $739 million in revenue for its fiscal year ended Jan. 31, 2011, according to the statement. Credit Suisse AG advised the sellers, and Evercore Partners Inc. advised the buyer.

Updated : Ericsson of Sweden said Tuesday that it would buy Telcordia, one of the architects of the U.S. telephone system, for $1.15 billion.

With the acquisition, Ericsson, the world’s largest maker of telecom network equipment, will increase its footprint in telecommunications software and services in North America, allowing it to profit from the strong growth of mobile and broadband services.

Telcordia, which was sold by private equity firms, was part of the former monopoly American Telephone & Telegraph before its court-ordered breakup in 1982. Previously known as Bellcore, the company helped devise basic functions like caller I.D., call waiting, toll-free 800 numbers and mobile number portability.

Ericsson bought Telcordia in part to expedite its push into North America. The pending acquisition is the largest for Ericsson since its $1.13 billion purchase in 2009 of the wireless equipment business of Nortel, the bankrupt Canadian equipment maker.

Hans Vestberg, the Ericsson chief executive, said in an interview that Telcordia would help boost Ericsson’s expansion of its North American managed services business, a segment where Ericsson takes over the day-to-day management of an operator’s phone network for a fee.

‘‘The combination of Ericsson’s global leadership position and Telcordia’s long-standing expertise in solving the most complex communications challenges will benefit customers through new services and expanded capabilities,’’ Mark Greenquist, chief executive of Telcordia, said in a statement.

The private equity firms Providence Equity Partners and Warburg Pincus, which bought Telcordia in 2005 from Science Applications International Corporation, are expected to eke out a small profit on the deal. Providence and Warburg acquired the company from SAIC for $1.35 billion. But the effective purchase price was reduced by several items, including the sale of the company’s headquarters. Telcordia is the latest AT&T legacy business changing hands. Like Telcordia, Avaya is owned by private equity firms; TPG Capital and Silver Lake paid $8.2 billion for the company in 2007.