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Late Reprieve for VocalTec?

Light Reading
News Analysis
Light Reading
9/26/2005

Struggling softswitch vendor VocalTec Communications Ltd. (Nasdaq: VOCL) may have found a white knight to save it from closure.

Its potential savior is privately held media gateway vendor Tdsoft Ltd., a fellow Israeli VOIP vendor that names Cisco Systems Inc. (Nasdaq: CSCO) among its investors. (See Tdsoft Launches VOIP Gateway.)

And VocalTec needs help. Despite having products and customers in the increasingly hot VOIP equipment market, the company is on its last legs, and appears to have rid itself of most of its staff -- no one is answering the phones today at either in Israel or at its New Jersey offices. (See VocalTec in End Game, VOIP Pioneer Faces Meltdown , and Carrier VOIP Deployments Surge.)

The firm, which has seen its business decline to quarterly revenues of little more than $1 million, has struggled to find users for its new range of VOIP systems. (See VocalTec Reports Q2, Cuts Back.)

That's not all. With its share price standing at $0.60, down from $1.46 a year ago and more than $6 at the start of 2004, a delisting from Nasdaq looms.

And with the company fast running out of cash, VocalTec is desperate to find a rescuer before it fades away. In June this year the company received an investment commitment from VOIP industry figure Jeff Pulver, but no such investment has been announced or registered with the Securities and Exchange Commission (SEC). (See VocalTec Receives Nasdaq Warning and VocalTec Seeks New Funds.)

But according to local Israeli media reports, senior VocalTec executives have been talking with Tdsoft about a possible takeover. The two companies would complement each other technically: VocalTec has a centralized media gateway controller and associated OSS software, while Tdsoft has the media gateway technology that sits at the edge of the network.

Tdsoft at least has a body on the end of the phone line. Dan Ostroff, VP of marketing and sales, says the speculation "isn't something we can talk about at the moment. We're not really interested in discussing rumors."

Tdsoft has about 75 staff and is reported to have revenues of around $20 million a year, though the company doesn't comment on its sales. To date, it has specialized in voice gateways, including voice-over-ATM products as well as its VOIP equipment. It names Bezeq, , (NYSE: Q), and United Pan-Europe Communications NV (UPC) (Nasdaq: UPCOY) among its customers.

— Ray Le Maistre, International News Editor, Light Reading

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