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Competition Drives Baby Bells to Sell Bellcore to Defense Firm

Photonics Spectra
Jan 1997
Kathleen G. Tatterson

TRENTON, N.J. -- After more than 18 months of negotiations, a San Diego-based defense technology contractor has agreed to buy Bellcore, the research concern of the seven regional Baby Bells.
In the deal, reportedly worth $700 million, the sale of Bellcore to Science Applications International Corp. (SAIC) will be finalized in late 1997, pending federal and state regulatory approval. Each owner company would receive an equal share of the proceeds.
The consortium Regional Bell Operating Companies currently owns Bellcore (Bell Communications Research). The owner companies are: Ameritech Corp. of Chicago, Bell Atlantic Corp. of Philadelphia, BellSouth Corp. of Atlanta, NYNEX Corp. of New York, Pacific Telesis Group of San Francisco, SBC Communications Inc. of San Antonio and US West Inc. of Denver.
In April 1995, the companies announced they would sell the consortium's research arm, stating that because of increasing competition, the owners no longer had a common purpose with competing technology and deployment needs for Bellcore's fiber optics technology, products and services. According to Bellcore representative Barbara McClurkin, the deal will free the company of restrictions that limit the type of work it can do for the consortium members.
Although Bellcore does not anticipate any layoffs, McClurkin did not rule out work force fluctuation caused by changing customer demands. Its headquarters will remain in Morristown, N.J.

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The regional Bells chose SAIC because it provided the ability to maintain the company's core resources, technology and personnel, said William A. Roper, SAIC's chief financial officer. More than 22,000 employees own the firm, which specializes in high-technology products and services for national security and private industry. Bellcore's 5600 workers are expected to acquire shares in SAIC, as well.
SAIC did not open any of its business units for public ownership to bankroll the deal, as was considered earlier, said Roper. The company reported a Fiscal Year 1996 revenue of over $2.2 billion. Bellcore's revenue exceeded $1 billion.

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