Megisto Breaks Silence

A revamped Megisto Systems Inc. will finally break its silence later this month, announcing a carrier win that marks the company's return to the fray after much effort to distance itself from the troubled wireless router market.

The startup (if it can still be called that) will use the 3GSM World Congress as the backdrop for the announcement, unveiling a commercial win for its Mobile Services Delivery System (MSDS) product.

“We are going to be announcing a customer at Cannes,” Gordon Saussy, president and CEO, told Unstrung this afternoon. “We have won business. It is a fully deployed, commercially launched, money-in-the-bank kind of deal.”

The win ends a lengthy period of radio silence from the company, following a major shift in market focus. Back in 2000, Megisto was one of four startups to set the pace in the wireless router, or GGSN (GPRS Gateway Support Node), space, intent on persuading cash-strapped carriers to install their specialist equipment (see Having a Flutter on the GGSNs).

GGSNs provide the primary interface between a carrier’s radio and packet core networks. The wireless routers from the startups were also intended to handle service creation, billing, and IP traffic management tasks.

Four years on and the landscape looks very different. Rivals Tahoe Networks and WaterCove Networks Inc. have both been gobbled up by incumbent vendors (see Alcatel Swallows WaterCove and Nokia Sweeps Up Tahoe), whilst Starent Networks Corp. is the only startup enjoying success (see Starent's Startup Double-Up).

Megisto claims to have moved out of the market altogether, with Saussy stressing that the move began as far back as “mid 2002.”

“It is clear to all of us who started up in this space that the problem we thought initially needed to be solved -- highly scaled mobile data connections with GGSNs -- never really emerged as we expected. We are now in a different space solving different problems... We are not essentially the same company. We needed to transform ourselves organizationally and culturally.”

According to Carol Politi, VP of marketing, the company “decided relatively early on that the focused wireless router market would not be sufficient to drive viability.”

“We focused on our strength in mobile value-added services -- specifically in prepaid, content charging, and service packaging -- to solve problems that we believe are critical for the operator and not well served by the market,” she comments. “Focusing on these value-added services has enabled us to deliver services more rapidly than we would have had we attempted to stay in both the access [wireless router] and service businesses at the same time.”

Saussy argues that this shift in strategy, combined with frugal spending of its $60 million dollars in VC backing, has secured the company’s long-term health. “We saw we were in the middle of a desert and we turned into a camel. Thankfully we are at the edge of the desert now and the industry is really heating up.” [Ed. note: one hump or two?]

The CEO claims that no further rounds of funding are expected, although he declines to comment on possible timescales for break-even. “We still have a sizeable amount left in the bank and I haven’t had to go back cap-in-hand,” he adds. “The last one was so fulfilling I see no reason to go through it again.” [Ed. note: Ah, just one hump then.]

Analysts are impressed with the company’s turnaround but point out the inevitable challenge of overcoming incumbent vendors in this market. “Megisto, ProQuent, and P-Cube all have a shot at providing the enhanced billing solution for large players,” believes Current Analysis's Ken Rehbehn. “But the new Cisco 7609 and 7613 Catalyst-based platforms for the Cisco Mobile Exchange raise the stakes significantly, and a decision to shift to a startup will not be an easy one.”

— Justin Springham, Senior Editor, Europe, Unstrung

lrmobile_madcow 12/5/2012 | 2:28:18 AM
re: Megisto Breaks Silence
This change in product strategy is a case of too little too late. After having spent $60 million and no results to show for it so far, it is difficult to see how this latest re-spin of their product is going to produce any different results. The platform that they are using is fundamentally the same.
There are also reports that the person in charge of their European Operations, John Williams, is leaving the company.
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