Agilent Gets Objective (from Motley fool)
Agilent Technologies announced the purchase of Objective Systems Integrators for $665 million, expanding its competency in the communication service providers market. Great demand exists in the operations support systems (OSS) market among communication service providers that require software to help manage and maintain their networks. After selling its medical division to Philips Electronics for $1.7 billion earlier this month, today's deal sends signals that Agilent is placing a heavy emphasis on the telecommunications segment.
By Mike Trigg (TMF Tonto)
November 27, 2000
This morning, test and measurement equipment maker Agilent Technologies (NYSE: A) announced that it had agreed to buy Objective Systems Integrators (Nasdaq: OSII) for $665 million in stock, helping build out its competency in the communication service providers market. The Street has sent shares of Objective Systems climbing 30% to $17.50 per share so far today, and shares of Agilent are down $0.94 to $51.88.
Under terms of the agreement, Agilent -- which was spun off from Hewlett-Packard (NYSE: HWP) a year ago -- will pay $17.75 for each of Objective Systems' 37.3 million outstanding shares. Based on Friday's closing price of $13.50, that represents a 32% premium. Both companies' boards have approved the deal and 54% of Objective Systems shareholders agreed with the offer.
On the revenue side, the purchase will slightly bolster top-line growth 1% in fiscal 2001 (began November 1). Meanwhile, the company expects to add $618 million -- excluding the assumption of existing Objective Systems stock options -- in goodwill, research and development, and other intangibles. The company expects the deal to dilute earnings for the fiscal year by $0.02 per share and be accretive thereafter. The Street consensus expectation calls for the company to earn $2.24 per share.
Objective Systems is a provider of operations support system (OSS) software, which enables service providers -- including telcos, application service providers (ASPs), and Internet service providers (ISPs) -- to deploy and manage communications networks and services. In other words, it gives a service provider the ability to monitor everything from customer use to fraud on the network.
Great demand exists in the OSS market among communication service providers that require software to help manage and maintain their networks. The company cited a Gartner Group projection in its press release today, stating the OSS market is expected to grow at a 39% compounded annual growth rate to $6.9 billion by 2003. Service providers continue to make sizeable investments upgrading their networks. The ability to monitor customer use provides those companies with the ability to know whether their money is being spent in the right places, or if the appropriate return on investment has been realized.
Earlier this month, Agilent sold its medical division to Philips Electronics for $1.7 billion. The sale, coupled with today's purchase, sends signals that Agilent is placing a heavy emphasis on the telecommunications segment. In fiscal 2000, communications test equipment was the company's fastest-growing segment, with sales increasing 55%. Integrating Objective Systems' software into its own testing and measurement solutions provides Agilent with a unique offering. |
