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Agilent Makes Play for OSI

Agilent Technologies Inc. Monday snapped up Objective Systems Integrators Inc., a provider of next-generation operations-support-system (OSS) software for communications service providers, in a cash deal valued at about $665 million.

OSI designs, develops and markets OSS software that integrates and manages the provision of communications services in large-scale, multi-vendor environments. Its products are designed under its NETeXPERT Unified Management Architecture to provide integrated systems for service assurance, service delivery and service usage. Agilent's current role in the OSS market is in Signaling System 7 (SS7) management. It also provides Internet service-level agreement (SLA), eCommerce management software and optical-network management solutions.

Agilent said it expects OSI will enhance its solution portfolio with key technologies and industry-leading expertise.

"OSI is a great fit with Agilent's strategy and clearly positions us as the leading provider of OSS solutions for current and next-generation communications service providers," said Ned Barnholt, president and chief executive officer of Agilent. "We will be acquiring an innovative, profitable and fast-growing company that will strengthen our ability to help communications service providers meet their biggest challenge: To bring new services to market quickly and provide a revenue stream to leverage their huge network investments."

OSI will become a division of Agilent's Communications Solutions Group.

"This acquisition will enable Agilent to immediately meet the needs of service providers deploying 3G wireless, optical, broadband Internet Protocol (IP) and voice-over-packet networks and services," said Tom White, senior vice president of Agilent's Communications Solutions Group. "The rapid integration of OSI's platform and applications with Agilent acceSS7, accessFiber and Firehunter systems will quickly create flexible, open, scalable solutions to enable effective operation and management of next-generation networks."

Agilent will pay $17.75 for each outstanding share of the Folsom, Calif.-based company. Agilent anticipates that the transaction will close in about six weeks, after completion of the tender offer and other closing conditions have been met. OSI shareholders, representing about 54 percent of the company's outstanding shares have entered into voting agreements and also agreed to tender their shares in the tender offer. Agilent's tender offer is subject to its receipt of a majority of OSI's outstanding shares, as well as a majority of the OSI shares not owned by the shareholders who have entered into voting agreements. As part of the deal, Agilent will assume OSI employees' existing stock options.

Agilent said it expects OSI to be modestly accretive to its revenue growth in fiscal 2001, adding about 1 percentage point to revenue growth for the full year. It also expects the acquisition to generate about $618 million in goodwill, other intangibles and in-process R&D -- excluding the effect of the assumption of OSI employees' stock options. The company expects to amortize the total amount over an average of three years.

However, on a cash EPS basis, the company expects the acquisition will be slightly dilutive in 2001 and accretive after that. The company said it expects its EPS will be lowered by about 2 cents in fiscal 2001.



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