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Tech Industry

Tech mergers kick off New Year

Several tech companies announce acquisitions to strengthen their market positions, including communications-chip maker Agere Systems and ID management firm Netegrity.

    Several technology companies announced acquisitions to strengthen their market positions at the start of the New Year, including communications-chip maker Agere Systems and identity management firm Netegrity.

    On Friday, Agere Systems, based in Allentown, Pa., acquired TeraBlaze, a privately held developer of Gigabit Ethernet switching products, for $21 million in stock. All 16 employees of TeraBlaze, based in Cupertino, Calif., will join Agere, including TeraBlaze founder and CEO Shankar Muhkerjee.

    Agere, which supplies chips used for cell phone and Wi-Fi applications, said it bought TeraBlaze to bolster its ability to deliver high-speed switches on a single chip for computer networking. Market research firm Dell'Oro Group estimates that the Gigabit Ethernet switch market will total about $12 billion in 2004.

    "The acquisition of TeraBlaze advances our strategy to take share in the fast-growing Gigabit Ethernet market," Sohail A. Khan, executive vice president of Agere's Infrastructure Systems Group, said in a statement.

    Agere said the purchase would result in a $12 million to $14 million charge for in-process research and development. Excluding that charge, Agere said, the purchase would impact earnings by less than $0.005 per share for fiscal 2004, which will be offset by cost reductions.

    On Wednesday, Netegrity, based in Waltham, Mass., scooped up Israeli start-up Business Layers for $42.5 million, including $15 million in cash and $27.5 million in stock.

    Netegrity plans to integrate Business Layers' e-provisioning technology within its identity and access management product. It also will continue investing in the provisioning technology as a standalone offering. Provisioning software helps companies handle security and increase efficiency by automatically allocating information technology resources among employees, customers, contractors and others, as dictated by corporate policy.

    "Netegrity has long recognized the strategic importance of provisioning and its key role in identity management," Chief Executive Barry Bycoff said in a statement. "The market is clearly evolving to an integrated identity and access management solution that spans the enterprise and beyond."

    Netegrity is expected to keep Business Layers' 50 employees and its research and development center in Israel.

    Excluding acquisition-related charges, Netegrity said it expects to be profitable in the 2003 fourth quarter and the 2004 first quarter.

    On Thursday, TechTeam Global, an information technology outsourcing provider based in Southfield, Mich., bought Digital Support Corporation for $6.3 million. DSC, based in Chantilly, Va., provides helpdesk, systems integration and other outsourcing services to government and commercial customers.

    TechTeam said the deal includes an additional payment of up to $2.5 million if DSC meets specified income objectives and other conditions over the next two years. TechTeam expected the acquisition to generate after-tax income of between $0.07 and $0.10 per share for 2004.