Irvine’s Telelogic North America Inc., which was bought by IBM Corp. earlier this year, is getting down to business after months of wading through red tape surrounding the deal.
IBM’s $750 million buy of Swedish parent Telelogic AB, which closed in April, got hung up on investigations over competitive and regulatory concerns by the European Commission.
In all, Big Blue’s buy of Telelogic took about nine months longer than expected.
“The toughest thing by far was the wait,” said Ken King, an IBM vice president who headed the Telelogic acquisition and integration. “During that time, we couldn’t really interact with the people at Telelogic. It took longer to get things planned and to make product road maps.”
Telelogic, which eventually will just go by IBM, has roughly 100 workers here.
Simply put, the company makes software that helps other companies build custom software programs.
Telelogic’s software helps others manage the requirements of a larger project and helps them integrate their software with packaged applications.
“Our software products are for developers to enable them to build their software with lower costs, better quality and a faster time to market,” King said.
The company has expertise in so-called “embedded” software that goes into manufactured products such as autos, airplanes, medical devices or cell phones.
Telelogic’s software helps manufacturers develop programs that run electronic sensors, navigation equipment and other automated tasks.
“Telelogic is very heavily geared toward manufactured systems,that’s a different buyer altogether,” King said. “There’s a whole different type of reliability and quality required,you don’t want an airplane which has its navigation (system) fail.”
Its customers include automakers, the military and defense contractors.
It counts Boeing Co., General Motors Corp. and Sprint Nextel Corp. as some of the biggest.
Before Big Blue came calling, Telelogic saw roughly $200 million in yearly sales, with about half from Irvine.
Back then, its goal was to grow revenue five-fold in five years.
Telelogic had been growing through aggressive acquiring,the company has bought some 10 companies in the past eight years.
The Malm & #246;, Sweden-based company came to Orange County in 2000 with its buy of Continuus Software Corp.
The Irvine office eventually became the hub for Telelogic’s North America operations, where it now does marketing, customer support and development for a handful of product lines.
The local operations were folded into IBM’s rational software group, which is headed out of Somers, N.Y.
Management, Deal Benefits
There’s no single top executive heading Telelogic in Irvine.
A trio of managers runs the business: Greg Sikes, director, enterprise architecture and systems modeling; Per Asberg, director, IBM rational worldwide client support, systems products; and Jesper Christensen, director, Telelogic change and configuration management.
IBM wanted Telelogic for a number of reasons.
“The acquisition enables IBM to get more aggressively into the systems market,” King said. “It’s not just the products Telelogic has,it’s the people, the sales organization, the software developers and their customer relationships.”
Telelogic stands to gain, too, from IBM’s tremendous reach, according to Sikes.
“There’s a lot in it from our perspective,” he said. “Many of the things that IBM brings really could be summarized as opportunities of scale. IBM has a global sales organization that has orders of magnitude larger than Telelogic’s and relationships at Fortune 500 companies we could only dream of having.”
The company also gets some of IBM’s big research and development dollars thrown their way, Sikes said.
“Telelogic now has a chance to get more market share,” IBM’s King said. “They don’t have the ability to get into the C-level offices as well as IBM does. As a result they get pulled into bigger deals.”
Delays
IBM, an experienced acquirer, ran into delays when regulators raised concerns about the company possibly gaining a corner on the market for a particular type of modeling software.
“They felt that IBM would have the majority of the modeling products out there,” King said. “Once we were able to convince them that there were no troubles with competition and IBM was not monopolizing the market, we were able to clarify the overlap in products.”
Telelogic conducted business as usual while IBM waited for the green light.
“Up until the last day when it was confirmed to us that the acquisition had been approved, our job was to keep our individual teams focused,” Sikes said. “There was a remote chance that it could fall through. But as time went by, the chances were less and less.”
