Lucent Technologies Inc is looking to boost its place in the integrated messaging market and quickly. It is to acquire integrated messaging software company Octel Communications Inc for $31 per share valuing the deal at around $1.8bn. Lucent says it pay cash as a way to speed the deal through which it expects to be closed by the end of August. On the technology side the fit looks to be strong one. Lucent’s voice messaging products have yet to make much headway in the small- to medium-sized business market in the US. Acquiring Octel will bring a global base as the company’s Integrated Messaging Architecture (IMA) products are used by more than 140 service operators around the world. Later this year Octel is also expected to launch Universal Messenger, an enterprise network product which will unite voice, fax and electronic mail messaging in a single package. In addition to broadening Lucent’s voice processing systems offerings, the deal will open up Lucent’s strong relationships with network service operators primarily across the US. The deal will enable Lucent to create a strong rival to Northern Telecom Ltd and Siemens AG in the booming market for messaging systems supporting wireline and wireless services which is currently growing at approximately 30% per year. The total messaging market is expected to be worth $10bn by 2000. However, some of the shine was taken off the deal with Wall Street as Lucent, which announced storming third- quarter figures on Wednesday – announced that it would take an unspecific charge in the fourth quarter relating to the deal. The company said it would take a significant one-time, non-cash charge against its earnings related to the write-off of in process research and development. Adding that the unspecified charge would be likely to have a significant effect on net earnings for the fourth fiscal quarter of 1997 as well as the company’s net earnings for the fiscal year ending September 30 1997. Following the closure of the deal, Lucent’s remaining messaging efforts will be folded into a new division, the Octel Messaging Division, which will be headed by Octel’s founder and CEO, Bob Cohn, who joins the Lucent board. According to Lucent, all of Lucent’s 400 messaging employees will be transferred to the new unit. The boards of directors of both companies have approved the acquisition. The offer and merger are subject to the purchase of a majority of the outstanding shares of Octel Communications common stock, as well as other customary legal requirements. The transaction is expected to be completed by the end of August. The purchase is expected to be neutral to earnings in the first full year of operation and accretive thereafter.
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