Siemens enterprise rises, backed by Gores

A re-energized Siemens Enterprise Communications could give competitors a run for their money

VoIP, unified messaging, products and services

Late last month, Siemens announced it had decided on The Gores Group as a partner for its enterprise communications business. The partnership decision follows Siemens' increased investment in its existing global services infrastructure, its move to deliver software-based unified communication services announced earlier this year, and a restructuring plan the company announced in March.

Under the agreement, The Gores Group will acquire a 51% stake in Siemens Enterprise Communications (also known as SEN), while Siemens will retain a 49% stake. Gores and Siemens plan to invest approximately €350 million in the joint venture, not including research and development investments and other ordinary business expenditures as part of the ordinary course of business. The investments are targeted to help SEN launch new products, acquire other technology platforms that can benefit from SEN's distribution organization, and according to the company “further drive the expansion and transition of the business from a hardware supplier to a software and service provider” – a transition we highlighted in February. The joint venture is expected to close at the end of Siemens’ fiscal year 2008, pending regulatory approval.

With the announcement, SEN also reinforced its commitment to continue with its OpenPath migration to new unified communications solutions, along with continued long-term support and upgrades for other SEN products, including the HiPath 3000 and HiPath 4000.

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Late last month, Siemens announced it had decided on The Gores Group as a partner for its enterprise communications business. The partnership decision follows Siemens' increased investment in its existing global services infrastructure, its move to deliver software-based unified communication services announced earlier this year, and a restructuring plan the company announced in March.

Under the agreement, The Gores Group will acquire a 51% stake in Siemens Enterprise Communications (also known as SEN), while Siemens will retain a 49% stake. Gores and Siemens plan to invest approximately €350 million in the joint venture, not including research and development investments and other ordinary business expenditures as part of the ordinary course of business. The investments are targeted to help SEN launch new products, acquire other technology platforms that can benefit from SEN's distribution organization, and according to the company “further drive the expansion and transition of the business from a hardware supplier to a software and service provider” – a transition we highlighted in February. The joint venture is expected to close at the end of Siemens’ fiscal year 2008, pending regulatory approval.

With the announcement, SEN also reinforced its commitment to continue with its OpenPath migration to new unified communications solutions, along with continued long-term support and upgrades for other SEN products, including the HiPath 3000 and HiPath 4000.

In addition to the influx of additional investment and solid management experience that Gores brings to the joint venture, the move also adds product portfolios from Enterasys and SER Solutions to the SEN arsenal. Enterasys Networks, which began as Cabletron Systems in 1983, holds hundreds of patents and has thousands of active customers in more than 70 countries. SER, founded in 1980 as EIS International, is focused on building best-of-breed call center technology.

Alec Gores, founder and chairman of Gores, said in prepared statement: “Combining the three companies will lead to a more complete enterprise networking and communications offering that will leverage Siemens Enterprise Communications' powerful distribution capabilities, global reach and extensive customer base.”

Our observations: When Siemens AG announced two years ago it planned to divest its enterprise communications business to focus on its other interests, including healthcare and energy, rumors of the SEN demise were rampant and SEN customers were rightfully concerned about the group’s future. However, with this announcement, we think that customers can now set aside any concerns they had – and that SEN competitors like Avaya and Cisco, should now be preparing for a tougher battle ahead against the re-energized Siemens Enterprise Communications.

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Steve Taylor is president of Distributed Networking Associates and publisher/editor-in-chief of Webtorials. Larry Hettick is a principal analyst at Current Analysis.