Baby Bells to Put Research Lab Up for Sale : Telecom: The action comes after months of wrangling over what to do with the powerful jointly owned Bellcore unit.
The seven regional Baby Bell telephone companies, increasingly divided over how best to capitalize on the booming telecommunications market, announced Thursday that they will put their powerful jointly owned research arm up for sale.
The long-rumored move to sell Bellcore--which holds 439 U.S. patents, has a work force of 6,000 and generates about $1 billion in annual sales--comes after months of fractious infighting over how and when to put the Livingston, N.J.-based unit on the market.
Bellcore’s 10-member board did not say how it will sell the company, which has been trying to branch out beyond its Bell research roots to develop software and products for non-Bell telephone applications. Officials have privately said they have discussed taking the company public or selling it to a group of private investors. Bellcore has retained investment bank Morgan Stanley Inc. to analyze the market.
Bellcore Director J. Cliff Eason, president of network service for regional phone company SBC Communications (formerly Southwestern Bell), said Bellcore is still exploring options and will probably continue to enjoy the research largess of most of the Baby Bells even after a sale.
“From our standpoint, we will continue to do a major amount of business with Bellcore. . . . They do an outstanding job,” Eason said.
Analysts say Bellcore could fetch between $750 million and $1.5 billion. They say any sale is likely to touch off a major industry restructuring as the Bells redirect millions of dollars of research spending to competing laboratories and telecommunications developers.
“The R&D; that flowed to Bellcore will flow more widely to computer hardware and software developers” and telephone switch manufacturers such as Northern Telecom, said Dan Elron of Coopers & Lybrand.
Since its formation in 1984 in the aftermath of the federal government’s breakup of the AT&T; telephone monopoly, Bellcore has been a powerful and influential incubator of communications technologies in an industry undergoing tremendous change.
Besides its critical role in controlling the allocation of telephone numbers, Bellcore has done pioneering work uncovering ways to squeeze more phone conversations and other data through ordinary copper wire.
But as the Bells move to modernize their networks to deliver video and wireless telecommunication services and seek government approval to offer long-distance phone service, the Bells increasingly find themselves at odds. By selling Bellcore, they hope to eliminate potential research conflicts.
“As our respective businesses change, a consortium (research) arrangement no longer makes as much sense as it did when Bellcore was formed over 10 years ago,” said Bellcore Director Martin A. Kaplan, executive vice president of the technology and services group at Pacific Bell.
He added that an independent Bellcore could provide a broader menu of products and services than is now possible because of various constraints imposed on its owner companies.
