Telica: Lucent's Good Buy

Lucent Technologies Inc. (NYSE: LU) has landed itself a first-rate VOIP vendor in softswitch and media gateway vendor Telica Inc., says Heavy Reading analyst-at-large Graham Beniston.

Lucent announced in May that it was buying Telica in a stock deal worth $295 million and closed the deal last week (see Lucent Buys Softswitch Vendor Telica and Lucent Completes Telica Acquisition).

Having taken a long hard look at the softswitch and media gateway markets for two major reports, the boy Beniston reckons Lucent picked the cream of the crop (see Heavy Reading Reports on VOIP).

"Lucent couldn't have made a better acquisition. It's difficult to compare the softswitch players, but Telica really stood out. It has impressive softswitch technology and one of the best media gateways."

He says Telica's technology has evolved in a very practical way. The vendor started with a core media gateway, but from interworking testing with other vendors it discovered the limitations of existing softswitches and decided to build its own based on its existing platform.

"It was all built for the largest service providers, so that fits nicely with Lucent's customer base," adds the analyst.

It also fits in nicely with Lucent's determination to be included in Verizon Communications Inc.'s (NYSE: VZ) voice-switch replacement program, where arch rival Nortel Networks Ltd. (NYSE/Toronto: NT) currently has the upper hand (see Nortel Soars on Verizon VOIP Deal).

To get back in the game at Verizon, Lucent needed to sort out its meandering VOIP strategy and beef up its product portfolio, both of which it appears to have achieved with the Telica acquisition (see Russo's VOIP Spin Confounds and Lucent Performs Softswitch U-Turn). And to brighten Lucent's hopes further, Verizon is already a Telica customer.

And it's not the only one. Telica's equipment is deployed in more than 60 networks, and has been adding to that base even as the Lucent deal was closing. (See ATX Uses Telica Softswitch, CommPartners Picks Vendors for VOIP Buildout, and Broadvox Deploys Telica Softswitches.)

But at least one of Lucent's competitors doubts whether the acquisition will make Lucent a stronger force in the softswitch market -- at least, not yet.

Hassan Ahmed, CEO of Sonus Networks Inc. (Nasdaq: SONSE), believes Lucent will continue to work on the softswitch it has been developing inhouse and marry that up with Telica's media gateway. "We see Lucent as a competitor way down the road," says the Sonus CEO, whose company has just completed a tortuous few months restating its financial results (see Sonus: Whew!).

Lucent, naturally, is bullish about its prospects given its new arsenal of products, customers, and acquired talent of 250 staff, and sees the acquisition bringing it immediate firepower. When the deal was first announced, Janet Davidson, the president of Lucent's Integrated Network Solutions (INS) business, stated that Telica's existing technology, which is far denser and more scaleable than anything Lucent already had inhouse, would allow it to compete for carrier deals immediately. "Carriers are issuing RFPs and deploying equipment now... time to market is critical, and that was a major driver [for the acquisition]."

And Lucent may not stop there in its quest to build a competitive VOIP equipment position. Market rumors of a move to acquire hosted IP PBX platform player BroadSoft Inc. persist, though both parties say they're just good friends (see Lucent to Buy Broadsoft? and Lucent Teams With BroadSoft).

— Ray Le Maistre, International News Editor, Light Reading