Advanced technologies are never perfect. They need quite a bit of testing and monitoring. This is the business of Tektronix (NYSE:TEK).
An innovator for more than 50 years, Tektronix provides testing and monitoring services for a variety of industries, such as telecommunications, computers, and semiconductors. In 2003, the company posted $920 million in revenues and $118 million in net income.
Yesterday, Tektronix showed its enthusiasm for the telecom sector with its purchase of Inet Technologies (NASDAQ:INET) for $325 million. The deal involves $6.25 per share in cash and $6.25 in stock of Tektronix. Inet's stock surged 16.5% on the news.
Inet provides software solutions for diagnostics and testing for operators of next-generation networks, such as 2.5G and 3G. But the more alluring aspect of Inet's business is its abilities to monitor the quality of VoIP (voice over Internet protocol) networks. The company's products are strong enough to attract network equipment manufacturers like Cisco (NASDAQ:CSCO), Nortel (NYSE:NT), Lucent (NYSE:LU) and Alcatel (NYSE:ALA).
With the deal, Tektronix will essentially double its telecom business to $200 million. And, with its broader technology offerings, it should be able to better grow the business.
While Inet has demonstrated success -- with profits of $11.7 million on $104 million in sales last year -- the fact remains that the company is in a fierce market, with competitors like Agilent (NYSE:A). Moreover, to capitalize on the growth opportunities, especially in VoIP, Inet will need scale.
By selling out to Tektronix, Inet is better positioned. And, of course, Tektronix benefits from the growth, as well.
Fool contributor Tom Taulli is the author of The EDGAR Online Guide to Decoding Financial Statements . He does not own shares in any of the stocks mentioned.
