Telephone equipment maker Lucent Technologies today announced it has acquired Quadritek Systems, a privately held, start-up developer of next-generation Internet Protocol network administration software, for about $50 million in cash.
Founded in 1993, Quadritek employs about 70 people. The purchase is expected to result in a one-time charge against earnings. The charge involves an accounting writeoff assigned to in-process research and development and will be taken in the quarter ending December 31. Excluding the one-time charge, the impact of the purchase to earnings is expected to be immaterial.
Shares of Lucent jumped higher on the news and were trading up 3 points or 5.10 percent, at 61.88. The stock has reached as high as 108.5 and as low as 36.19 during the past 52 weeks.
Last year, Lucent implemented a strategy to address the data networking business and introduced an enhanced portfolio of intelligent switching, access, and network management products as a part of its plan to improve data networking performance.
Since then, Lucent has acquired Livingston Enterprises, a provider of remote access networking solutions for the Internet; Prominet Corporation, a developer of Gigabit Ethernet local area network switching and routing products; Yurie Systems, a wide area network access equipment supplier; MassMedia Communications, a developer of network interoperability software; and LanNet, a global provider of next-generation Ethernet and ATM intelligent switches for local area networks.
Despite the number of acquisitions, analysts speculate that Lucent may be on the verge of gobbling up a large networking company in hopes of capitalizing on opportunities presented by the convergence of voice and data networks--an acquisition the size of Northern Telecom's purchase of Bay Networks. One talked-about purchase candidate is Ascend Communications.
Since its spin-off two years ago from AT&T, Lucent has been restricted by the terms of its separation from the telecommunications giant to swallowing smaller players. But starting from October 2, Lucent is able to use the "pooling of interests" method of deal-making, an accounting method that will allow for stock-swap takeovers, which ultimately lowers the cost of making acquisitions.
"Lucent may not be in a big rush to use its pooling because their stock is off their annual high of 108," said Linda Varoli, an analyst at Merger Insight, an independent research firm. "They may not be willing to hand out their stock right now."
Instead, Lucent moved to acquire the smaller Quadritek, based in Malvern, Pennsylvania, which supplies a family of products that configure and automate the administration of global IP networks for enterprises and service providers.
"The mass migration of corporations and service providers to IP-based networking is fueling tremendous demand for advanced automated software tools to simplify network management and administration," said Bill O'Shea, president of Lucent's Data Networking Systems group. "[Quadritek] will play a critical role in the new policy-based management systems of tomorrow, where networks will be managed down to the specific needs of individual users.
"This will help us deliver on our stated goals of reducing network complexity, lowering administrative costs, and improving security for data network operators," O'Shea added.