Newtown-based EPAM Systems acquires Conshohocken-based Empathy Lab

Tom Paine

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An acquisition announced yesterday passed me by, perhaps because it came out first over the Thomson Reuters One wire, which is rather obscure here (thanks to Technically Philly for picking up on it). Newtown-based EPAM Systems has acquired Conshohocken-based Empathy Labs. Terms were not disclosed in an SEC filing by EPAM.

The pairing might seem a little odd at first. Empathy Lab, founded in 2005, focuses on digital strategy and designs customer websites with an eCommerce focus, having clients such as The American Red Cross and Wilmington-based 21st Century Insurance. But it also has significant business in the cable and home entertainment industry, with clients such as Rogers Communications (the Comcast of Canada), NBC Universal, DirecTV, and Comcast itself. Empathy has also been heavily involved in developing TV-Everywhere applications for John Malone's Liberty Global, a largely Europe-focused cable operator, and other cable systems. I don't know how much this segment accounts for out of its total business, but it seems to be substantial. In EPAM's release, its CEO Arkadiy Dobkin cited Empathy's "proven expertise in two important growth areas - development and execution of enterprise-wide Commerce initiatives and transformation of Media consumption and distribution channels". I would guess another reason for EPAM buying Empathy is to acquire higher-level client-facing, strategy level executives to deal with major prospects in the US and Europe.

Flying Kite Media reported last year that Empathy was on target for 2011 revenue of $14 million, with about 70 employees at the time. Just last week Empathy announced several interesting new hires. Its CEO is co-founder Kevin Labick.

EPAM Systems went public in February of this year. Sometimes referred to as the Cognizant of Eastern Europe, because most of its technology wokforce is based there, its customers include Google, SAP, Barclays Capital and Coca-Cola. Dobkin came from Belarus and after migrating to the US worked for Colgate-Palmolive and SAP Labs before starting EPAM.

EPAM (NYSE: EPAM), founded in 1993, now says it has over 8,000 employees; at the time of its IPO the company told me it had about 150 employees in Newtown. In its third quarter 2012 results released in November, EPAM reported revenue of $110.1 million, up 27.4%, and GAAP net income of $14.1 million. Its market value is approaching $900 million.



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