San Diego Business Journal

Connecticut Company Buys Local Firm for $23.5M

Thursday, December 22, 2011

Tangoe Inc. of Connecticut said it acquired Profitline Inc., a San Diego telecommunications expense management business, for $23.5 million in cash.

The transaction that closed Dec. 19 called for a down payment of $14.5 million and payments of $4.5 million next year and another $4.5 million in the next 18 months.

Founded in 1992 by Rick Valencia, Profitline negotiates and manages telecommunications contracts for companies. In 2001, it reported annual revenue of $6.5 million but has since stopped revealing that figure.

Tangoe, which reported $76 million in revenue for the nine months ended Sept. 30, said it expects Profitline’s operations to contribute $400,000 in revenue to its fourth-quarter results, and $14 million to $15 million in revenue in 2012.

Al Subbloie, chief executive of Tangoe, said Profitline’s revenue had declined in recent years partly because his company had captured some of Profitline’s customers.

The acquisition will broaden Tangoe’s customer base, particularly in the federal government arena, where Profitline had good brand awareness, Subbloie said.

Among its federal customers are the U.S. Postal Service, Department of Interior and National Aeronautics and Space Administration. In all, the company had about 50 customers, he said.

Profitline has about 100 employees, and except for senior management, most will be retained, Subbloie said. The business has its headquarters in Sorrento Mesa and another office handling mobile telecom management in Columbus, Ohio.

Incorporated in 2000, Tangoe conducted an initial stock offering in August, raising $66 million. The communications software company completed the purchase of two other telecom management firms in 2011, spending about $11 million.

Tangoe said it has never made a profit and reported losing $7 million in 2008, $2.6 million in 2009, $1.8 million in 2010, and $3.85 million for the first nine months of 2011.

— Mike Allen