Procera's Prospecting for Partners

Sources close to Procera Networks say the vendor is looking into OEM relationships as a way to find alternate sales channels for its traffic management technology. (See Broadband Traffic Cop Needed.)

While the company has "explored strategic alternatives" in the past, this time there's an interesting wrinkle. One source we spoke with in the financial community insists that Cisco Systems Inc. (Nasdaq: CSCO) is the vendor that Procera is in advanced talks with.

Procera VP of sales Gary Johnson says he won't confirm or deny anything, while Cisco spokesman Wilson Craig decided to address the here and now: "Cisco has no relationship with Procera."

Procera has only 14 salespeople worldwide, and could use a large OEM partner to get its "PacketLogic" traffic management product in front of big operators around the world.

This week, the company announced Tieto Corp. will resell and support its gear in Scandinavia and "will also be a cornerstone in Procera Networks' current aggressive rollout in Germany, Italy and France."

A couple of years ago, the company was in search of a buyer or some OEM partners to resell its other bits of gear. It told Light Reading's sister publication, Byte and Switch, it was in search of "a partner with existing sales channels and customer credibility." Procera even hired a banker partner to make introductions. (See Procera Picks New Path.)

Cisco's competitors say Cisco might be interested in reselling Procera's "PacketLogic" software because its own P-cube traffic management product (now called Cisco Service Control) may be losing business to the smaller rival, especially among smaller-sized ISPs.

Oren Raboy, product manager of Cisco's Service Control, says his product is already used by 300 service providers around the world, many of them small and medium-sized.

"The pricing pressure we see around the product is moderate," Raboy adds. He offers that his main competitors are Allot Ltd. (Nasdaq: ALLT), Sandvine Inc. , Ellacoya Networks Inc. , and Packeteer Inc. (Nasdaq: PKTR).

Though Cisco and Procera compete in several areas, Procera says its traffic management technology has been complementary to Cisco's gear in most of its customers' networks. "It is interesting to note that this network infrastructure is made up primarily of Cisco and PacketLogic hardware and software, and we work incredibly well together," said Doug Glader, Procera's CEO, in a November 2006 conference call.

That said, analysts assert there is money to be made selling traffic management gear of all sorts as network operators look for ways to deal with network congestion caused by P2P and video traffic.

A recent Heavy Reading report says operator spend on traffic management technology will grow 36 percent a year and will reach $600 million in 2010.

"We see a crisis developing within the broadband services market as new bandwidth hungry video-oriented applications threaten to swamp today’s broadband networks," Emerging Growth Research analyst Joe Noel writes in a February 28 investor brief. "We believe the broadband service providers will need to rapidly deploy these devices or risk losing control of their networks."

And, while Cisco is humming along with its P-Cube product, Procera claims to have a technology that Cisco doesn't. The company says its appeal lies in a novel way of doing traffic management called "deep flow inspection." That involves searching deep within a packet to find its identity, but also includes looking for patterns in the flow of packets before and after it. The technique was invented by a team of young developers at the Swedish company NetIntact, which Procera acquired in 2005. (See Procera, Netintact Merge .)

Procera's VP of OEM sales, Jon Linden, says: "We look at a lot of different criteria, including payloads, bi-directional information, source and destination, number of bytes, and specific location."

Linden says the technique identifies traffic correctly more than 90 percent of the time, while competitors do so in the 80th percentile range. Linden says these results came from a test done by Telefónica SA (NYSE: TEF).

Procera, which spun out of Digi International (Nasdaq: DGII) in 2002, says PacketLogic has been deployed by more than 300 service providers worldwide. (See Cavalier Uses Procera.)

— Mark Sullivan, Reporter, Light Reading

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