Aug. 3, 2020

Remember the 1989 Oscar nominated movie “When Harry met Sally…” starring Billy Crystal as Harry and Meg Ryan as Sally? They first met during a cross-country ride to attend college and stayed in touch for 12 years of dating and missed chance encounters, raising the question: can men and women ever just be longtime friends? Applied to Amdocs and Openet, they met in court a decade ago and are now engaged! That raises the question: can longtime fighting in court foster dating and eventually lead to marriage?

LET’S RAISE A PINT OF GUINNESS

July 23, 2020, Amdocs announced the acquisition of long time privately held rival Openet for €155M ($180M). Founded by Joe Hogan in 1999, the Irish company employs 580 people, including 200 in Dublin and emerged as a fierce challenger in policy control, charging and data management software used in 4G mobile core networks. Now with the start of 5G core network rollouts, policy control, charging and data management are split between hot network functions of the novel cloud-native 3GPP service-based architecture (SBA). The deal is presented as beefing up Amdocs’ portfolio to accelerate the migration to the cloud. Really?

ONE SURE THING, OPENET’S REVENUE IS A DROP IN THE AMDOCS BUCKET

For its fiscal year ending September 30, 2019, Amdocs reported revenues of $4.1B in 2019 up 2.8% YoY and expects revenue growth in the 2% to 6% range for 2020. By contrast, Openet has brought in around €70M for the past two years, which is roughly a €28M drop from a peak 3 years ago with a reported pretax profit of €6.9M. This highlights limited profitability that corroborates well with Amdocs saying the acquisition won’t do much for its earnings per share for a couple of years at least. In fact, the impact of the acquisition on Amdocs’ non-GAAP diluted earnings per share is expected to be neutral in the full fiscal years 2020 and 2021, and accretive thereafter, it said. In addition, it looks like Openet’s peak revenue year coincides with the patent infringement settlement with Amdocs.

Wireless subscribers can access the full research note here: http://lightcounting.com/auth/login