As I talk to experts who shall remain nameless for now about Redknee’s announced plans to acquire Nokia Siemens’ BSS business the feedback is mixed, ranging from “it makes sense” to “it’s a bit of a head scratcher.” So, let’s consider what it means.
First, this doesn’t turn the billing market upside down. I’ll wait for those who measure market share to sound off officially on this – and likely they will disagree with each other – but it doesn’t look like this suddenly creates a new billing behemoth. What we have here is a relatively small though innovative player – Redknee – trying to absorb a relatively large player – NSN’s BSS unit. But while NSN is large relative to Redknee, and has a notable share of the billing market, it’s not quite one of the big boys (Amdocs, Ericsson, NetCracker, Comverse, to name a few). So this is interesting, but probably not Earth-shattering from a market share perspective.
The finance guys and other analysts are likely to sound off on the valuation of this deal, since it looks to be in neighborhood of about $50 million. In the speculation surrounding NSN’s desire to sell this business unit, numbers like $377 million were tossed around. So, this valuation is a pretty big surprise. Suitors like Ericsson, Amdocs, or perhaps an investment bank were considered far more likely than Redknee. So, the fact that Redknee came out of the woodwork – so to speak – to make this purchase seems like a surprise. At the very least it was a bold stroke by a company with an ambitious vision of its future and possibly a splendid bargain.
From a product perspective, some experts are suggesting – thus far – that this makes sense for Redknee in that it massively expands the company’s product portfolio and gives it offerings in both the cloud and on-premises worlds, not to mention channels into many new Tier 1 operators it did not have previously. Other experts point to the alignment between NSN’s charging business – an outgrowth of its roots in the network – and Redknee’s specialization in real-time billing, charging, and right offer-right time solutions. So the product and customer basics make sense here.
If I were to put my investment banking hat on (if I even had one; I understand they’re quite expensive) I’d say that all other things aside, Redknee is taking a step to puff itself up for a high value exit. Take on some debt, take on some size, do some clean up work, and start sending feelers over to the big acquirers in the market that this is an asset worth absorbing. Redknee’s investors then get the rate of return they seek while the whole start-up-to-pay-day cycle gets accelerated pretty nicely.
Whatever the case, Redknee still has to execute here (which I’m sure they know; I’m not just being trite). Biting off this much and digesting it is a challenge for any company; Joey Chestnut himself would pause a moment before biting into this big of a hot dog. If you’ve ever sat down with Redknee CEO Lucas Skoczkowski you will know that he is a self-admitted fast and copious talker (smart and entertaining as well). So, the big question now is – Lucas, how fast can you chew?
If, and maybe when, Redknee pulls this off, they’ll deserve huge kudos. And who (other than the obvious) wouldn’t want to root for the little guy?