Aastra Tech expands PBX business through acquisition of German company

Toronto-based Aastra Technologies Inc. has inked an agreement to acquire the enterprise telecommunications business of German-based DeTeWe Deutsche Telephonwerks AG & Co. KG. The $51-million acquisition will allow Aastra, a relative newcomer to the PBX market, to strengthen current German operations, and to bolster business in France and in other parts of the European market. This is the third acquisition Aastra has made to bolster its presence in the PBX market in the past two years. In September 2003, the company finalized a $35-million agreement to acquire the enterprise communications division of Ascom Holding AG, giving Aastra a footprint in the European market. Headquartered in Switzerland, Ascom had, at the time of acquisition, more than 500 employees in 14 countries in Europe. Late last year, the company made a play for EADS’ enterprise telephony business, an acquisition that was completed in February. With operations primarily in France, the acquisition gave Aastra an even greater presence in Europe. The EADS purchase also opened up some opportunities in the United States where the company had limited operations. The acquisition of the enterprise telephony unit of DeTeWe bolsters Aastra’s foothold in the German market. The company already had approximately 40 employees located there. Following the completion of the purchase, employee headcount will balloon to approximately 700. (See box for information on product line categories and revenue estimates) Francis Shen, chair and co-CEO of Aastra, said during a conference call detailing the acquisition that the DeTeWe business is complementary to existing Aastra operations. "We gain a well-established distribution network in Germany, a strong cordless technology, including Wi-Fi, a long relationship with Deutsche Telekom as well as with the Belgium telephone company. Overall, this acquisition offers Aastra the size, scope and expertise to offer converged VoIP solutions, customized to the specific needs of each country in the western European market," he stated. Currently, the DeTeWe PBX business is operating at a loss, but Aastra has high hopes for turning the struggling enterprise telephony business around. Aastra management expects over the next six months to return the company to break-even by reducing operating costs and cutting uneconomic and non-strategic product lines. The company noted during the conference call that it has enough cash and short-term investments on hand to purchase DeTeWe’s enterprise telephony business, and that it won’t require external sources of cash. Aastra’s third acquisition in two years comes at a time of greater consolidation in the PBX vendor market with the larger players swallowing up the smaller niche market companies. It is becoming increasingly difficult for the smaller PBX vendors to compete against larger companies such as Mitel Networks, Avaya, Cisco, Nortel and others, which is fueling the consolidation trend now taking place. Francis Shen noted during the call that there is greater migration of IP telephony within the enterprise and the company has to take advantage of that. "If you look at (the acquisition), it was a consolidation story where this particular product line or category has traditionally been country focused and with the technology migration to VoIP, there’s a big shift and it allows us to be a consolidator in the space," he said. The company is also preparing to take bigger steps on the VoIP front. Noting that the DeTeWe group had some level of VoIP development expertise, but is mostly focused on the trunking aspect, Bret added, "This fits very nicely to what we’re doing. The beauty with VoIP is that typically hardware is very much the same and the commonality these days is SIP-based (session initiation protocol), so there’s definitely a good tie-in there." Despite the shift to IP in the enterprise telephony space currently taking place, Aastra isn’t in a hurry to jump on the IP bandwagon. Tony Shen, Aastra Co-CEO, doesn’t see great change in the company’s IP strategy – at least in the short term. "In the very near future, I see all the product lines to be in their own place because most of them are really localized to the specific country. Like EADS acquisition is really primarily for France, DeTeWe is primarily for Germany and the Ascom business has managed to get into a number of key countries. But going forward definitely with the Voice over IP convergence, we’re likely to see some sort of harmonization between systems," he said during the call. The large and lucrative United States market is still on the periphery for the company, which has limited operations south of the 49th parallel. Aastra isn’t saying much about the company’s future in the U.S. Says Tony Shen: "At present we have a strong niche market in the U.S. and we’re working to understand how we would develop that. We have our Aastra Intercom Group, which serves the very large campus solutions as well as call centres. So we are in that market, we’re still in the process of trying to understand it."

Aastra Tech expands PBX business through acquisition of German company

News | 07/22/2005 4:00 am EDT

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