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Rukmini Priyadarshini

Bangalore , June 6

SUBEX Systems sees acquisitions as critical for its growth even as it sees earlier payback on its acquisitions in the past few months.

"We strongly believe inorganic growth is critical for a product company such as ours and by acquiring a company with a ready product and/or customers we reduce the lead time to market, to gaining traction in markets and reduce the risk of developing and launching a product entirely from internal efforts," said Mr Subash Menon, CEO.

"We are constantly evaluating potential acquisitions," he said but declined to give a time frame for making an acquisition.

The company expects its previous acquisitions of Alcatel's fraud management activity and assets of Lightbridge's fraud Centurion product, worth about $7 million to pay back in about 12-18 months compared to the 2-3 year payback period expected earlier.

"At profit before interest and tax (PBIT) of 50 per cent, we need revenues of $14 million for payback on our $7 million acquisitions and have already received support contracts worth $6 million from the acquired customers and expect three more customers to transition to Ranger during this fiscal, ensuring payback," Mr Menon said.

The acquisitions brought in over 40 customers all of who have stayed on for maintenance and three of who have migrated to Ranger. Subex has a total of 115 installations to date.

"Further acquisitions will help us net customers in the developed Western markets, he said. Subex Systems expects its total addressable market to go up from $220 million in 2004 to $400 million in 2008 and we expect to have a 15 per cent market share, compared to our current 6 per cent," Mr Menon said.

The EMEA region is showing the best growth while the US market is starting to see traction, Mr Menon said. EMEA region contributed over 50 per cent of Subex's 2004-05 revenues and the company expects the contribution to increase this year.

Average revenues per contract too are on the increase, at $8,75,000 for year ended March 2005, but could go up to as much as $1.2-1.3 million in the next 2-3 years, Mr Menon said.

For Subex, which competes with the likes of HP and specialists such as Lightbridge, it will be critical to move into more Tier 1 operators across geographies, he added.

The company said it is looking to increase awareness of the nascent concept of revenue maximisation through its integrated platform approach.

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