Call-center products and services are far from sexy. But the business isn't going away, especially as more companies globalize and outsource. Instead, it's expanded to become the contact-center industry, dealing not only with calls but also emails and Web site contacts.
Concerto Software is one of the contact-center industry's leaders. This week, it strengthened its position by agreeing to acquire Aspect Communications (NASDAQ:ASPT) for $1 billion.
Concerto, itself born out of a merger, is no stranger to acquisitions aimed at consolidating the call-center market. Customers want quality solutions at competitive prices, and the call-center industry already has fierce competition from players such as Cisco (NASDAQ:CSCO) and Nortel (NYSE:NT).
Naysayers might express concern over upstart players and the potential effects of call centers/administrative centers in developing nations such as India. But I think there's another driver for this deal. Contact-center customers -- Concerto's include Motley Fool Stock Advisor pick FedEx (NYSE:FDX) and Verizon (NYSE:VZ) -- want more than just voice solutions. This deal will help round out Concerto's suite of services.
Perhaps the competition was pressuring Aspect. The company has had a rocky year, reporting a big decline in first-quarter earnings. Earnings fell by 20% to $10.8 million, and revenues fell from $91.5 million to $90.6 million.
Going private through Concerto will relieve Aspect of the significant costs of being a public company. While Cisco and Nortel can spread these costs over larger revenues, smaller companies like Aspect can't. Private ownership will also let Aspect sharpen its competitive edge with long-term investments and restructuring actions, which usually spook Wall Street.
Interestingly enough, on the news of the deal, Aspect's shares actually fell $0.06 to $11.38. Why the muted response? Well, the deal was far from a secret, and Aspect hadn't shown signs of renewed strength. In the press release for the transaction, the company also lowered guidance for the second quarter.
Aspect shareholders are lucky they didn't see the stock fall yet again. Aspect's flight into private ownership is further evidence that, for now, the contact-center industry is not a growth story. It makes more sense for longer-term players such as Concerto.
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At the time of publication, Fool contributor Tom Taulli held no financial position in any company mentioned in this article.
