Cisco Drafts Dynamicsoft

Cisco Systems Inc. (Nasdaq: CSCO) says it will acquire Dynamicsoft Inc., a Session Initiation Protocol (SIP) infrastructure software vendor, for about $55 million in cash, including the assumption of about $3.8 million in debt.

Dynamicsoft was founded in 1998 and now has 104 employees. Upon close of the acquisition, the Dynamicsoft organization will report to Don Proctor, VP and general manager of Cisco's voice technology group.

The company makes the kinds of software platforms that help route calls, text messages, emails, and other communications over both wireless and wireline networks. The company has more than 100 customers, including Vonage Holdings Corp.

Vonage provides its VOIP service by reselling Cisco's ATA (analogue telephone adaptor) device and licensing software from Dynamicsoft and media servers from Convedia Corp.

Cisco Systems has the biggest market share in VOIP systems and the largest number of SIP phones shipped, according to Heavy Reading's May 2004 report, "SIP Hosted Services: A Heavy Reading Competitive Analysis."

"However, Cisco's product is still based on the vendor's proprietary SCCP protocol (a version of MGCP – Media Gateway Control Protocol), and while it supports SIP trunks, it does not offer some key SIP functionality, such as presence management," writes the report's author, Margaret Hopkins.

"We have added call features that were losing us contracts; we haven't lost deals for lack of SIP support," Cisco told Heavy Reading at the time.

Apparently, to Dynamicsoft's good fortune, Cisco's lack of SIP functionality may indeed have been losing it some contracts.

— Phil Harvey, News Editor, Light Reading

alchemy 12/5/2012 | 1:16:52 AM
re: Cisco Drafts Dynamicsoft #1: Vonage sells the Motorola VT-1000 as their SIP device, not a Cisco product. Motorola displaced Cisco a pretty long time ago. This sort of calls into question the whole statement about Cisco market dominance in this space.

#2: Cisco lost out to DynamicSoft on a Comcast videophone trial. Their quote that they'd never lost business due to lack of SIP functionality is less credible than Dan Rather. I believe this lost deal was the event that pushed Cisco to buy a technology leader in the space.

When you think about it, $55 million for a company that's supposed to be on the bleeding edge of SIP proxy techology is chump change. It goes to show that you can't make a viable business model out of the SIP proxy business... especially now that 3G wireless based on SIP appears to have crashed & burned. If you can only charge single dollars per subscriber for your solution, you can't generate enough sales to justify doing the business. Only a company that gives away the SIP proxy function for free as part of the rest of their solution is going to be viable. DynamicSoft has some SIP heavy hitters who appear as authors on lots of RFCs but they haven't shown how you can make any money from the technology. This should help Cisco sell their other products and that's probably enough to justify shelling out the dollars to acquire the technology.
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