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Ericsson in a major buying deal in the U.S. Stock price rose in Stockholm upon the news



  

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Tuesday, 14 June 2011
Telecoms giant Ericsson will pay approximately SEK 7 billion in cash for the U.S. telecom company Telcordia. A perfect combination considers Ericsson and the market responds positively to the purchase move.

Ericsson's purchase of Telcordia will strengthen the Swedish telecom giant's position in operating subsidies and business support systems for operators. Telcordia has its main market in North America, but also sells software and services elsewhere. It's about a perfect combination according to Ericsson.

"The importance of operational support, and business operators will grow as more things will be connected to mobile networks and more services going mobile, while new business models are introduced, "said Hans Vestberg, Ericsson's CEO, in a written comment.

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The market for software and systems integration was accounted to be worth USD35 billion in 2011 and is expected to grow in size by 6-8 percent per year between 2010 and 2013.

The bill for the purchase will land at just over USD 1 billion, equivalent to over Skr7 billion. Ericsson will pay cash.

Sellers are Providence Equity Partners and Warburg Pincus. The deal is expected to be close during the fourth quarter of this year and is subject to competition authorities approvals.

Ericsson expects that the purchase of Telcordia will have a positive effect on results 12 months after the acquisition. Telcordia had revenues of  USD789 million for the fiscal year ended January 31, 2011, that equivalent to over Skr5 billion.

Analysts in Sweden say that that Telcordia reported an operating income of USD184million for the fiscal year. This represents more than Skr 1.2 billion.

Telcordia is headquartered in Piscataway, New Jersey and the company has 2,600 employees.
In the stock market answered positively to the Ericsson's move and received thumbs up by investors. Shares rose after the news bout 14.30 Swedish time. 1.30 British time,  Ericsson B shares was up by nearly 1.9 percent to Skr88.90.
By Scancomark.se Team


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