Lucent hopes the acquisition will help it leapfrog its competitors as it enters the billing and customer care market, considered an integral part of selling integrated solutions in a communications software market.
Kenan specializes in highly flexible billing, order processing, and customer analysis software that supports virtually any combination of services, vendor equipment, and networks. This enables service providers to use one software program to produce a single customer bill for any combination of wireless, wireline, voice, data, Internet, and broadband cable services.
"We weren't a player in this space, so we decided to jump to the head of the pack by acquiring the hottest player in the business," said Lucent executive vice-president and chief operating officer Dan Stanzione in a statement. "Now we'll be providing industry-leading products in a global third-party billing and customer care market segment that's growing even faster than the overall communications software market."
Lucent expects the communications software market to grow 25 percent annually to $26 billion by the year 2000.
Stanzione added he expects the acquisition to contribute to Lucent's growth outside the United States.
"Kenan Systems has deep relationships with incumbent and second carriers around the world," he said. "Its global reputation and sales channels will give Lucent access to new customers in important world markets."
Kenan customers outside the United States generate about 40 percent of the company's revenues, and include clients like British Telecom, MCI WorldCom in Britain, and France Telecom, according to Lucent.
Kenan will receive about 12.88 million shares of Lucent common stock priced at Friday's closing share price of $115.25. Lucent expects the transaction to be completed in the quarter ending March 31, 1999.
The acquisition, which will be accounted for as a pooling of interests, is expected to be accretive to earnings beginning in fiscal 1999, the first year of combined operations.
The acquisition is expected to add to Lucent's already strong network management expertise.
Kenan will remain headquartered in Cambridge, Massachusetts, when it becomes a wholly owned subsidiary of Lucent, reporting to the company's Communications Software Group.