2005 was a big year for mergers

Telecom pairings, software acquisitions marked year

This year saw the completion of several major mergers and acquisitions in the federal information technology and telecommunications business sectors, and a few more began that will conclude in 2006.

Major telecom firms merged in 2005 while bidding on crucial contracts, software companies expanded their capabilities with strategic acquisitions, and foreign firms landed in Washington, D.C., by adding U.S. divisions to acquired companies.

Transferring calls

The merger of SBC Communications and AT&T was completed in November. The two companies agreed to retain the AT&T name under a redesigned logo. The merger's closing came after a lengthy sequence of approvals, starting with shareholders. The Justice Department and Federal Communications Commission also had to approve the deal, as did the public utility authorities of the states where the combined company operates.

Verizon and MCI are also merging. At press time, the companies still needed a handful of state approvals and were predicting that the deal would close late in 2005 or early next year. Justice, the FCC and shareholders have all approved the merger.

Sprint completed its acquisition of Nextel in August, greatly expanding Sprint's ability to provide wireless services. The company is now called Sprint Nextel.

The telecom shuffling all takes place against the backdrop of Networx, a governmentwide contract that the General Services Administration will award next year. The successor to FTS 2001, Networx will provide telecom and network services for most government agencies, as FTS 2001 does now.

Foreign powers

QinetiQ, a British defense contractor, announced its intent to acquire Apogen Technologies, a midsize systems integrator that was formed from the 2004 merger of two small technology companies. QinetiQ owns two other U.S. companies — Foster-Miller and Westar Aerospace and Defense Group — through its North American subsidiary. The three firms together could become a potent team, according to Apogen executives. The acquisitions reflect QinetiQ's determination to cultivate the U.S. government market.

Foreign companies don't always make their presence felt from an ocean away. In April Nortel Networks, a Canadian maker of network equipment, moved to acquire PEC Solutions and created a U.S. subsidiary called Nortel PEC Solutions. The companies merged their expertise in equipment and services, and the combined employee count of about 2,000 gives the new entity competitive heft.

Software, hard bargains

Oracle expects to close its acquisition of Siebel Systems early next year. Justice approved the deal in November, paving the way for Oracle to expand its customer relationship management software business. The acquisition will be one in a series of transactions Oracle is pursuing. The company acquired PeopleSoft in 2004 after a lengthy series of negotiations.

In an effort to resuscitate its image after emerging from bankruptcy, Peregrine Systems agreed to be acquired by Hewlett-Packard in a deal announced in September. Through the merger, HP will inherit Peregrine's flagship asset management and service management products and eventually integrate them into its own product lines.

Adobe Systems and Macromedia joined forces this year, too, bringing Macromedia's popular Flash technology into Adobe's powerful document management portfolio. The addition of Flash, best known for powering Web animation, came as Adobe was shifting its government message away from specific technologies and toward an emphasis on agencies' business needs.

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