Implications
1.There are questions being raised about Tekelec’s ability to survive as a single entity.
2.Just the threat of Cisco Systems entering the STP market, is hardly good news.
3.Tekelec’s current lack of diversity is going to be a problem.
Analysis
Tekelec has become a one-trick pony again by selling off its switching business. While those products were not anything exceptional, the supplier is left with just its Eagle STP offering.
The difficulty with its STP is that Tekelec is only barely making money in this slowly declining market space. It appears that the vendor cannot even afford to lose literally even one customer.
At a recent show in Las Vegas, Cisco systems had its ITP device front and center in its display. Cisco claims it can be a full-blown STP by using the common hardware with its big routers. Just the existence of an offering in which Tekelec had pretty much previously had a monopoly, could result in lower prices and thinner margins. The only benefit is that the U.S. federal government has expressed concern about Tekelec being bought out by another firm because of the vital importance of STPs in the network. Now with at least the appearance of another competitor, Tekelec might more easily get acquired.
It seems very odd that GENBAND decided to buy Tekelec’s switching gear, which is perceived to be less than desirable. However, GENBAND appears to be a well-run company. In addition, the CEO of GENBAND was the former head of Santera Systems, so he is not getting into it blind. It is possible that there is a plan in combination with other assets it has acquired to make it all work.
