Network equipment vendor
Alcatel SA (NYSE: ALA; Paris: CGEP:PA) is rumored to be in the final stages of talks to acquire wireless router startup
WaterCove Networks Inc. for a minimal fee.
A source familiar with the negotiations tells
Unstrung that the French infrastructure vendor is gearing up to take over the GGSN (GPRS Gateway Support Node) manufacturer, following the OEM partnership it struck with the startup last August (see
WaterCove Wins Alcatel).
Another industry insider claims the purchase price is “virtually zero,” adding that WaterCove is teetering on the brink of bankruptcy after “blowing over $70 million in VC money.”
“Alcatel
bought them for peanuts -- that's if they paid anything at all for them,” adds our man on the inside.
Such scuttlebutt is in keeping with recent comment on the
Unstrung message boards suggesting that all is not well at the startup (read the posting
here).
GGSNs provide the primary interface between a carrier’s radio and packet core networks. In their next-generation guises, wireless routers can also handle service creation, billing, and IP traffic management tasks.
The deal would further reduce the number of startups operating in the wireless router market, all of whom are attempting to lobby carriers into bypassing the usual roll call of established vendors such as
Juniper Networks Inc. (Nasdaq: JNPR),
Cisco Systems Inc. (Nasdaq: CSCO),
Nortel Networks Corp. (NYSE/Toronto: NT) and
Lucent Technologies Inc. (NYSE: LU).
Last year rival startup Tahoe Networks shut up shop and saw its assets gobbled up by Finnish giant
Nokia Corp. (NYSE: NOK), whilst
Megisto Systems Inc. has had little to shout about in recent times (see
Nokia Sweeps Up Tahoe).
Analysts believe a WaterCove acquisition would leave Megisto needing to prove its worth, especially in light of recent success from fellow startup
Starent Networks Corp. (see
Starent Shines On and
Starent's Startup Double-Up).
“If WaterCove gets acquired, Megisto will stand out as one of the few remaining independent wireless router start-ups and will be pushed to show some real commercial success as soon as possible,” claims
Current Analysis' Peter Jarich.
Alcatel itself is keeping schtum on the deal. “We don’t comment on rumors or speculation,” says spokesman Mark Burnworth.
WaterCove did not return calls by press time.
— Justin Springham, Senior Editor, Europe,
Unstrung
