If Tekelec can unload the Switching Solutions Group [SSG] or simply close it down, the company is nicely positioned as a PE-buyout target or acquisition target by a mid-tier public company looking to augment service provider revenues with annual revenues in the $425-500M range at attractive margins. I am not surprised that the leadership team appears stalled in their decision making process in regard to the disposition of the switching division. From one perspective they can see an under performing asset with a long market run in front of them, but the other perspective is that they are undercapitalized to make a run the C5 replacement business.
New leaders need to make quick decisions to transform companies for overtime the impetus to make bold decisions is lost. This appears to be happening at Tekelec. The reason I think Tekelec makes for an interesting foundation for a roll-up business model is their revenues and sources of revenues. Several PE-VC and PE-Buyout people have asked me for buyout targets that have good revenue streams that they can then bolt on innovation from startups or use as platform to roll up other companies.
Here is an excellent example of a company that has a stable legacy business that can be used to fund a rollout strategy. Think of this as the inverse innovation model. Instead of funding a technology development (i.e. startup) in search of a market and revenues, buy a company with revenue streams and then figure out what innovative products or technologies can be added to company. This strategy assumes that when a target market is consolidating in terms of the number of spending entities, yet the overall size of the market is growing in terms of market size, it might be more difficult to convince customers to adopt technology from new companies, then new technology from old companies. The hypothesis is: companies with existing relationships can move new products and technologies into the market faster then companies without commercial relationships.
Full Disclosure: I do not own shares of any of the companies mentioned in this post.