The seven Regional Bell Operating Companies (RBOCs) may be on the point of announcing a buyer for Bellcore, their jointly-owned research arm, a year and a half after they announced their intention to sell it. According to the Wall Street Journal, San Diego, California-based defense contractor Science Applications International Corp (SAIC) could announce as early as this week a plan to buy Bellcore for about $700m. Both companies are declining to comment. The deal’s long gestation period is believed to have been the result of a number of factors. Firstly, the complex ownership structure of Bellcore is thought to have led to disagreements about the best way of disposing of it: Bellcore is equally owned by affiliates of Ameritech, Bell Atlantic, BellSouth, Nynex, Pacific Telesis Group, SBC Communications and US West, each of which is thought to have had its own ideas on the best way to proceed with the sale. This problem has been compounded by the fact that the most likely candidates for buying Bellcore – cable television operators and other phone companies – are increasingly moving into the markets dominated by the RBOCs, which have wanted to avoid giving the new competition any advantage. For this reason, a sale to SAIC is viewed an ideal solution for the RBOCs, since the company poses no immediate threat to them: unlike other defense companies such as Whittaker Corp (which acquired Hughes LAN Systems last year and Xyplex Inc this year), SAIC has not already diversified into communications, so while Bellcore would give it a strong foothold in the market, it would not be enough to pose a challenge to the RBOCs. Employee-owned SAIC has more than 22,000 employees, and claims annual revenues of more than $2bn. Although the company currently gets about 85% of its business from federal government defense contracts, over the last few years it has invested in applying its advanced systems and software engineering expertise to commercial and international clients. According to the Journal, each of the RBOCs has signed multi-year contracts with Bellcore to ensure that existing obligations are met, and projects currently under development will continue.
