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Siemens takes the U.S. by storm

The European technology giant buys two telecommunications equipment start-ups and invests in a third, and says it isn't finished yet.

After lurking around the borders of the United States for some time, Siemens has finally pounced.

The European technology giant today acquired two telecommunications equipment start-ups and announced an investment in a third--the second such move in the data networking industry in a week.

Siemens announced that the newly acquired firms will be reorganized into its new U.S.-based data networking division called Unisphere Solutions.

Although company executives did not release the exact terms of the deal, according to reports Siemens was expected to pay $240 million for Argon Networks, and $300 million Castle Networks, and take a $30 million stake in Accelerated Networks, a remote access firm.

With the formation of the new company, Siemens is hoping to strengthen its foothold in the converging worlds of voice and data communications.

"As we all know, it is about convergence in the packet world and voice world," said Unisphere chief executive Martin Clague at a press conference in New York. He added that Siemens already feels confident in the cellular market, but wants the company to take a stake in the rapidly expanding data market.

"We know the data and IP world but we want to get to know it better and we want to know it stronger," added Clague. "That is the reason for this new company."

The targeted customers of this new company will be Internet Service providers and telcos "that as part of deregulation have began to offer more and more services," Clague said.

Both Argon and Castle specialize in devices that can migrate telecommunications carriers from older voice technology to new data-based equipment, with each one targeting a separate niche.

"[Unisphere] is not a start-up, but a jump-up," said Clague. "We start somewhere shy of $200 million in revenue. That comes from the pieces that are already here."

The company did not cite any definitive products that they will sell, saying only that many products were currently in beta testing in the United States.

Merger mania
The move follows two purchases by French telco equipment giant Alcatel last week.

Although rumors persist that Siemens was interested in 3Com's carrier-oriented business, the German company only said that it was examining the possibility of expanding its existing venture with 3Com.

"We are exploring many areas where we will be expanding on the announcement from December and we are hopeful that we will see some significant steps going forward," said Anthony Maher, a member of the manager's board of Siemens' Information and Communications Networks group.

Unisphere will be headquartered in Burlington, Massachusetts, and have about 500 employees throughout the United States, as well as a few in Munich, Germany.

Clague did not elaborate on whether they planned to take Unisphere public in the near future, but did add that the company would make further focused acquisitions.

"At this time we are getting into the business and serving our customers," said Clague. "We are not going to get diverted in our focus [from talks] of going public."

Both Siemens and Alcatel are looking for a larger piece of the lucrative data networking equipment market and are also cultivating a greater presence in North America. Given the trend to combine voice, video, and data traffic across a single layout based on Internet protocol, data equipment is viewed as a necessity by firms--domestic and international alike--that previously only provided systems for telephone companies.

"The Europeans are coming, the Europeans are coming finally," noted Craig Johnson, principal with industry watcher the Pita Group, based in Portland, Oregon. "The battles are just now starting"

Other international giants interested in the North American market include wireless giant Ericsson, Fujitsu, and Nokia, among others.

"It's been clear for about two years that telecom companies such as ourselves have been trying to find a way to get caught up in this Internet revolution," said Krish Prabhu, chief executive of Alcatel USA, in an interview last week.