Eyretel to be acquired by Witness Systems

27 February 2003 Witness Systems, an Atlanta, Georgia-based provider of contact centre training and analysis tools, is to take over Eyretel, the UK call centre recording specialist.

“Our acquisition of Eyretel combines two of the leading application providers in the contact centre market to offer customers a truly global partner,” said Dave Gould, Chairman and CEO of Witness Systems.

“We believe Eyretel is an excellent strategic fit and will significantly strengthen our global customer base, extend our application suite and expand our partner network and distribution channels around the world,” he added.

The deal represents a bid by Witness to dominate the market for contact centre optimisation software.

Eyretel’s primary market – contact centre recording and quality monitoring – accounted for nearly half of the contact centre optimisation software market in 2001, according to Witness. The segment in which Witness is strong – contact centre e-learning and performance analysis – accounted for 22%.

Although there is some product overlap, Gould of Witness says that he is confident that the combination of the two companies will open up significant cross-selling opportunities. The companies are also a good geographic match – the majority of Witness’ revenues come from North America, while Eyretel, which has more than 600 customers, is strong in Europe, the Middle East and Africa.

Eyretel, one of the stars of the European technology boom of the 1990s, has been having a difficult time in recent months. For the financial year to March 2002, Eyretel reported net income of £700,000 on revenues of £50 million. However, in the six months to September 2002, the company reported a loss of £5.4 million on revenues of just £21.4 million.

In a trading statement released in November 2002, the company said, “Market conditions remain very difficult with customers delaying the implementation of contact centre upgrades. Whilst visibility remains poor, management will continue to keep a tight control on headcount and costs with the objective of… achieving profitability in the second half.”

Witness Systems has been largely unaffected by the market downturn. For the year to December 2002, it reported revenues up 8% and turned a $5.2 million loss for the previous year into a slim profit. With total revenues of $67.7 million (£43.1 million), the company is about the same size as Eyretel. Both have about 300 staff.

Witness has agreed to pay £37.4 million for Eyretel, which represents a 150% premium on the company’s share price prior to the announcement of the deal. Eyretel CEO Nick Discombe will become chief operating officer of the new group, with particular responsibility for ensuring the successful integration of the two companies. He has a good incentive to do so. Witness has said that it will pay Discombe a £1 million bonus when that process is complete.

However, the deal may meet with opposition from stockholders, who note that Eyretel has £23.1 million in cash, making the effective price Witness is paying just £14.3 million.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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