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Juniper to Acquire Kagoor

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News Analysis
Light Reading

Thumbing its nose at all the acquisition rumors of the past several months, Juniper Networks Inc. (Nasdaq: JNPR) today agreed to buy Kagoor Networks, a vendor of session border controllers, for $67.5 million in cash.

The deal indicates the importance of session controllers in service providers' plans. It also could signal a buying frenzy in the session border controller space, which has long been ripe for some acquisitions.

Juniper expects to close the acquisition in the second quarter of 2005.

During the past year, Juniper has been rumored to be on the hunt for an Ethernet company, a wireless company, a Layers 4-7 player -- almost everything but a session border controller vendor. "The rumor mill does run rampant, but we can't comment on its accuracy," says Christine Heckart, Juniper vice president of marketing (see Juniper's Slow Shopping Trip ).

But session border controllers fit into Juniper's Infranet Initiative, which involves bringing better security and reliability into applications such as VOIP.

"What session border controllers do is help you deliver better security, better quality, and better interoperability across IP networks, specifically for voice calls and other real-time media applications," Heckart says.

Juniper thought Kagoor had the best technology available, but it was also a good fit in terms of relationships. Kagoor has about 100 customers and "pretty near 100 percent overlap" with Juniper's roster. Kagoor also works with the same resellers as Juniper, namely Lucent Technologies Inc. (NYSE: LU), NEC Corp. (Nasdaq: NIPNY; Tokyo: 6701), and Siemens AG (NYSE: SI; Frankfurt: SIE). (See Kagoor Gets Hot With Lucent.)

The deal "is good for Juniper for the portfolio fit and because it strengthens their links to two major incumbent voice vendors, Siemens and Lucent," says Graham Beniston, analyst with Heavy Reading, Light Reading's paid research arm.

But as glitzy as its sector is, Kagoor hasn't exactly become a powerhouse. Its revenues were less than $5 million last year, according to Juniper's press release, and the company isn't profitable yet.

A couple of Kagoor's competitors that didn't want to go on record with their comments characterized the price Juniper paid as being on the upper end of what the company was worth, given its revenues.

Kagoor officials did not return calls requesting comment.

Analysts say it's no surprise that Juniper would want a session border controller, because the devices are becoming critical to IP deployments. "The Internet is not the driver any more," says Tom Nolle, consultant with CIMI Corp. "Most of the IP deployments are going to be built around some kind of service mission, and voice is going to be a big part of that." Nolle also sees a need for session border controllers, as service providers try to mold IP to their needs, with something less "permissive" than the Internet. He cited one large European carrier that has vowed not to use the plain Internet peering model to connect to any other providers. "They're going to have a policy gateway on any interconnection they have," Nolle says.

The Kagoor buy could trigger a long-expected avalanche of session border controller acquisitions. After all, it's a hot sector populated with plenty of startups. "Carriers of all shapes and sizes see a need for session border control, which means the prospects for SBC specialist vendors are generally bright," Beniston wrote in a recent Heavy Reading report, "VOIP Session Border Controllers." "We have expected, as many others have, that 2005 will be the year that we see SBC companies getting acquired," says Joel Fisher, vice president of marketing and business development for Jasomi Networks. "Jasomi has seen interest from potential acquirers on an ongoing basis for over a year."

Of course, an IPO is another possibility for session border controllers, given the hype surrounding VOIP. Earlier this month, Kagoor VP of marketing Jim Greenway noted his company would be "looking into it." (See Session Controllers Stir IPO Interest.)

— Craig Matsumoto, Senior Editor, and Mark Sullivan, Reporter, Light Reading

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User Rank: Light Beer
12/5/2012 | 3:21:07 AM
re: Juniper to Acquire Kagoor
I'm interested in what other companies are likely to be acquired in 2005. The session border controller space as noted in the LR article is prime for further consolidation with Jasomi, Acme and Netrake being my picks for potential acquisitions in 2005.

There really aren't any pure play media gateways or softswitches anymore but the services layer (application and media servers) driven by the excitement around IMS are other segments of the VOIP ecosystem which I think are ripe for some consolidation. Anyone have any views/guesses on who might go next in any of these spaces and who are the likely suitors?
User Rank: Light Beer
12/5/2012 | 3:21:02 AM
re: Juniper to Acquire Kagoor
Gotta like seeing them get 13x sales!
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