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Eric Krapf
Eric Krapf
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Siemens Enterprise Finds A Buyer

Some two years after it was spun off from the Siemens AG parent company, with the intention of being acquired, Siemens Enterprise (SEN)has finally reached that goal with today's announcement that Gores Group, a Los Angeles-based private equity firm, will acquire 51% of SEN, while Siemens AG retains the rest. (For more posts, go to No Jitter.)

Some two years after it was spun off from the Siemens AG parent company, with the intention of being acquired, Siemens Enterprise (SEN)has finally reached that goal with today's announcement that Gores Group, a Los Angeles-based private equity firm, will acquire 51% of SEN, while Siemens AG retains the rest. (For more posts, go to No Jitter.)But that's only the beginning. Gores Group and Siemens AG have founded a joint venture that will combine SEN with two other Gores portfolio companies, Enterasys and SER Solutions, which makes outbound contact center systems. Furthermore, Gores and Siemens AG will invest $550 million in the new joint venture, allowing it to start debt-free and sitting on a nice hill of cash to use for investment in R&D and potentially even strategic acquisitions.

SEN had been in limbo while a succession of rumors flew about who might acquire the company. Several private equity companies' names were tossed around, as were a few SEN competitors; just after the spinoff, Avaya was the most prominently mentioned name, but later Nortel was rumored to be pursuing a deal.

This looks like a pretty good day for Siemens and its customers. The acquisition finally chases away the cloud of uncertainty that has hung over SEN ever since the spinoff. And by going the private equity route, both vendor and customer avoid the pain of a mega-merger's organizational integration, with its potential effects on service and support. Also, by not merging with a competitor, the new SEN and its customers avoid the uncertainty and potential costs of the need to rationalize product lines. But just getting the situation resolved makes today a good day for Siemens customers. As Joe Kaeser, CFO of Siemens AG, said at the company's press conference, "The time of uncertainty and anticipation has come to an end for our customers and our employees."

Joining Enterasys to SEN gives the JV a solid voice-data play. They're not going to supplant Cisco, but then again, they seem to realize that. In their press conference today, Steve Yager, senior managing director at Gores Group, said, "Our theme has always been a strong #2 to Cisco."

The JV will get to continue using the Siemens name, which will help, as will the $500 million cash infusion that Gores Group and Siemes AG are pumping into the JV. During the press conference, executives emphasized potential acquisitions and "bringing new products to market" as the main use for the cash. My perspective on that is that Siemens starts with great products and they've been innovators in Unified Communications, introducing the first UC client in OpenScape. They clearly intend to build on this track record. The $500 million is in addition to the JV's R&D spending going forward.

But technology is only a part of the winning formula for UC. It'll be interesting to see if Siemens puts significant resources into marketing and developing their channel for UC applications apart from the traditional channels that PBXs have gotten sold through.

Siemens was originally Microsoft's top partner for UC, only to get dumped in favor of Nortel and the Innovative Communications Alliance that Nortel and Microsoft formed together. Since that time, Siemens has maintained its partnership with Microsoft but has been critical of Microsoft Office Communications Server's (OCS's) ability to serve as a PBX replacement. At the same time, SEN has moved to tighten its partnership with IBM Lotus, embedding OpenScape in the Sametime client.

So there are a lot of potential ways they can spend their newfound wealth to bring their products to market. The advice for SEN-watchers going forward: Follow the money.

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