Unified Communications Industry Consolidation - Lessons Learned from Ericsson Acquisition

The unified communications or “UC” industry has seen a strong consolidation trend, which Frost & Sullivan (News - Alert) also expects to dominate the competitive landscape in the near future.


Over the recent years, Mitel acquired Inter-Tel, Aastra and bought Ericsson's PBX business, and NEC purchased Sphere. More recently, privately held Avaya also won a stalking horse auction for Nortel (News - Alert) Enterprise Solutions, while Cisco announced that it will follow its previous acquisitions of WebEx, Jabber, and Postpath with that of Tandberg.

 

Further industry announcements are anticipated, and are likely to include non-traditional

telephony players.

It is interesting to see with Aastra, what challenges an acquisition can create for both buyer and seller. In order to better understand Aastra’s position, lets first look at the journey that led Aastra to the Ericsson acquisition.

Aastra’s Consistent Growth Strategy

Aastra Technologies is one of the largest players in the European business telephony market. Its aggressive strategy of organic and acquisitive growth has positioned it among the top three European vendors and one of the leaders globally in enterprise communications. While other industry players are currently struggling, Aastra has had over a decade of consecutive profitable quarters. It has successfully moved up the infrastructure value chain. Since 1993, when the company started to specialize in telecommunications it has had a history of acquisitions that shows a consistent growth strategy and total focus on enterprise communications.

Importantly, all new acquisitions have been complementary, in terms of technological expertise, product portfolio, distribution networks, and geographic presence. Starting with the acquisition of Nortel’s analog telephone business, the company has grown to enter the PBX market with the acquisitions of Ascom’s PBX division in 2003, EADS (News - Alert) Telecom in 2005 and DeTeWe KG also in 2005.

 

Ericsson, its latest and largest acquisition, further complements both its product portfolio, with solutions for large enterprise and mobility, and its geographic reach, with new channels into emerging markets.

Acquisition of Ericsson Opens New Channels

The acquisition of the Ericsson Enterprise Communications (News - Alert) Business substantially expanded Aastra’s customer base in Europe and globally, especially in markets such as Eastern Europe, Middle East and Africa, Asia Pacific, and North and South America.

 

While prior to the acquisition Aastra had operations in 15 countries, it now has a presence in over 34 countries. New channels into emerging markets allow Aastra to take advantage of the future growth in those regions, and Aastra has become the leader in Western Europe with complete coverage of the European region.

The acquisition was also very complementary to Aastra’s existing product portfolio. The addition of Ericsson’s Enterprise Communications extended Aastra’s reach in IP Communication Servers, UC applications, and integrated mobility with the concept of “one phone”.

Challenges after Acquisition

 

At the analyst event in Stockholm, Tony Shen, President and co-CEO of Aastra Technologies, reflected on the year following the acquisition, the biggest challenges the company faced, and the toughest decisions he had to make.

Getting people to work together and accommodating one another seemed to be the biggest challenge for Aastra and Ericsson. Although Aastra has gained experience from its previous acquisitions Shen noted that people forget what it was like to be acquired. He stated that the company not only had to win the new customers over, but also, and just as importantly, the employees.

Organizational cultures of both Aastra and Ericsson have strong commonalities based on Western European cultures. Willingness to work together is vital, especially so when the function is global and a very high degree of interaction is necessary – as in case of research and development or supply chain.

The acquisition of Ericsson took place just before the actual economic recession started. A down economy, coupled with European labor protection legal environment, obstructed and added to the complexity of the process.

 

Aastra’s management philosophy is to “prepare for the worse” by keeping sound financials and fit organization structure, which enables it to adapt to changing conditions.

In any consolidation there always will be some level of redundancy. As a consequence some workforce reduction might be necessary. This is also one of the toughest decisions to be made throughout the process. Additionally, some overlapping of products may exist so the company must identify its core competencies and converge products in its portfolio, while at the same time being cautious to not loose customers. 

Right Track

The integration process has not been totally completed yet. However, Aastra seems to be on the right track. The analyst community was impressed to see it remains

profitable in such unfavorable economic times. Shen also emphasized that in a market with so many uncertainties, Aastra is very well placed to become one of the major global player. Although it has grown in size and reach, it is important for the company to retain the practices that have been central to its success so far: agility, flexibility, and a close relationship with customers.

The company clearly demonstrates a well thought-out and careful approach. Aastra now needs to focus on accomplishing full integration and it will be

interesting to see what will be its next acquisition target.

 

 

 

Joanna Lewandowska

Corporate Communications – Europe

P: +48 22 390 41 46

E: [email protected]

http://www.frost.com