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Optical/IP

Session Controllers Stir IPO Interest

Following last week's Voice on the Net (VON) conference, there's a nice “buzz” surrounding the suppliers of session border controllers (SBCs), leading some to speculate that a variety of “liquidity events” may be available to those companies in 2005.

Light Reading asked executives from five such companies on the VON show floor last Wednesday about the possibility of declaring an IPO or being acquired by another company. The question was usually followed by a pregnant pause and a kind of “awe shucks” grin, and one got the distinct impression that they wanted to say more than discretion would allow.

  • Acme Packet

    "We won’t do an IPO in calendar year 2005,” CEO Andy Ory told Light Reading. “We have had some inadvertent months of profitability [ed. note: our italics],” Ory said, “and any given quarter we could be profitable, but now we are just trying to build the business.” Ory added that the company’s revenue mix is about 50/50 between carrier peering and access applications.

    Despite Ory's protestations, you might wonder if the company could "inadvertently" fall into an IPO, given its track record for surprising itself. You just never know when you might stumble into a big pile of money.

  • Kagoor Networks

    "An IPO is the holy grail of startups,” said Marketing VP Jim Greenwood. “We are going to be looking at it -- it’s just a matter of timing, but you’ve got to prove market dominance before you start talking about public monies.” Kagoor has not reached profitability yet, and Greenwood said it has set “no specific date” to break even.

  • Netrake Corp.

    CEO Bruce Hill told Light Reading his company expects to hit profitability in 2005, but has “no plans for an IPO this year.” Hill said his company concentrates on “connecting VOIP islands” with carrier peer-to-peer solutions, and on consumer access applications. NetRake is also beginning to sell products to large call centers, and to carriers for their borders with wireless networks.

  • Newport Networks Ltd.

    The IPO question has already been answered for Newport. The company declared an IPO far before it had a product; its stock is traded on the AIM stock exchange in the U.K. Brent Hayes, VP of sales, said the company was founded in 2000, and its product does peering between carriers and between carriers and enterprises. Hayes said the product “has just gone into trials,” but has not announced who’s testing it, and there is some question (from Newport's competitors) as to whether or not the device is a real product yet.

  • Jasomi Networks

    Jasomi's VP of technical services, Johnson Wu, told Light Reading that the company is growing and will likely (if it hasn’t already) consider at least a first round of VC funding before entertaining the idea of going public. Wu said Jasomi operates on funding from a few angel investors now. Jasomi broke even in Fall 2003, Wu said, but will not have a profitable quarter because of hiring increases. Jasomi derives 60 percent of its revenue from carrier-access edge applications, and 40 percent from carrier-enterprise applications.

    BroadSoft Inc. and Sylantro Systems Corp., two similarly young companies from the adjacent IP Centrex space, have both recently announced preparations for an IPO. One analyst says that just by playing in the attractive VOIP space these companies fulfill one of the major requirements for considering an IPO.

    So what does this all mean going forward? A variety of paydays may be possible, and not too far off, for some of the SBC companies. These include IPOs and acquisitions by incumbent infrastructure vendors who would rather buy the session controller functionality than build it.

    There's likely to be interest from the investment banking side to take some of these companies public. The SBC business is seen by some in the equities brokerage and investment banking communities as the “the last frontier” in the set of network elements that make up the VOIP infrastructure. Of the five SBC vendors Light Reading talked to at VON, only one is already public.

    Meanwhile, service providers and others definitely seem to be acknowledging the need for SBCs in their requests for proposals (RFPs). Service providers are now asking vendors to “help us deal all our edges,” as Acme Packet’s Ory put it.

    SBC suppliers play in three distinct areas of the VOIP network -- at the border with other carriers (peer to peer), at the border with corporate or small business networks (enterprise), and at the border with consumer users (access). While most SBC suppliers claim to meet all three needs, each has its own desired mix of business and this drives product development and marketing efforts.

    Perhaps 15 SBC vendors exhibited at VON last week. Light Reading spoke to those who sell, as their core business, “purpose-built” SBC devices (that is, designed specifically for session border control) to service provider customers.

    As it happens, an in-depth competitive analysis of no fewer than 40 SBCs from 23 vendors has just been published by Heavy Reading, Light Reading's market research company. For more details, please click on this link.

    — Mark Sullivan, Reporter, Light Reading

    For further education, visit the archives of related Light Reading Webinars:



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    DPD 12/5/2012 | 3:23:26 AM
    re: Session Controllers Stir IPO Interest The headline implies the startups are pursuing IPO's, but every quote you got was contrary.

    Acme: "We wonGÇÖt do an IPO in calendar year 2005"

    Kagoor: Kagoor has not reached profitability yet, and Greenwood said it has set GÇ£no specific dateGÇ¥ to break even

    Netrake: GÇ£no plans for an IPO this year.GÇ¥

    Newport (already public in UK): "some question (from Newport's competitors) as to whether or not the device is a real product yet."

    Jasomi: "consider at least a first round of VC funding before entertaining the idea of going public."

    Ok, what am I missing? Not even hinted at when they'll be even filing. Confusing article to say the least.
    dljvjbsl 12/5/2012 | 3:23:24 AM
    re: Session Controllers Stir IPO Interest Contrary to the webinar that is described in the article: Session Controllers are NOT the key to VoIP.

    VoIP competes with TDM systems. It has to find value that TDM systems cannot provide. Border controllers do not do this.
    OldPOTS 12/5/2012 | 3:23:18 AM
    re: Session Controllers Stir IPO Interest dljvjbsl,

    I would agree Marketing wise.
    But SBCs are technically critically needed in the network to control access to services, but then they are much like network management.

    There is not a volume for SBCs in the network, so they become relatively highly priced network units. But as always no wants to pay for software, after all it's only a PC.

    OldPOTS
    nqos 12/5/2012 | 3:23:17 AM
    re: Session Controllers Stir IPO Interest Session controller makers are probably the most
    noise makers in today's voip world. Functionally
    speaking, it is not a gateway. You can put two
    high speed PCs on both ends of firewall to play the proxy game. Talking about IPO, those vendors, beside Acme and another one, are not
    even profitable. Trying to fool the Wall Street ?
    dljvjbsl 12/5/2012 | 3:23:15 AM
    re: Session Controllers Stir IPO Interest
    But SBCs are technically critically needed in the network to control access to services, but then they are much like network management.

    There is not a volume for SBCs in the network, so they become relatively highly priced network units. But as always no wants to pay for software, after all it's only a PC.


    I think that we are in agreement SBCs are an idea that has more to do with tradtional telepcm thinking than any real benefit they bring to an IP network. They are akin to the SCPs in the AIN. They ahve as much value to the IP network as the SCPs do.

    I do not see that SBCs provide any disticnt value that will preclude tehm from being swallowed up by proxies or application servers.
    I would not be doing any long term investing in SBC companies. Pretty soon, they will be losing out to competition with products from Microsoft and Cisco that offer SBC fucntionality as part of their capabilities.
    turing 12/5/2012 | 3:23:15 AM
    re: Session Controllers Stir IPO Interest But as always no wants to pay for software, after all it's only a PC.
    ----------

    Only the low-end SBCs are software, the big dogs (Acme, Kagoor, etc.) have hardware to handle the media, do ACLs, etc.
    dljvjbsl 12/5/2012 | 3:23:14 AM
    re: Session Controllers Stir IPO Interest The VoIP hype is creating yet another bubble. We get one of these every few years. The recent fiber optic and dot com bubbles were matched by the microcomputer bubble of the 80s.

    Currently we are hearing a lot about soft switch, session border control and other types of VoIP companies. This brings up the question of just how robust these companies are. How long will it take for their value added to be assumed either by routers or desktops?

    Already Asterisk is supplying an open source IP PBX. There is nothing intrinsically valuable in any of the commercial products now. They all have SIP implementations, supply some types of codes, offer different codecs, authenticate callers etc. How can there be any more commercial value to these capabilities than there is to a TCP stack?

    All of the functionalities identified above are going to be assumed by other network elements. The companies that make these products are going to fade away just like all of the fiber optic start ups did recently and the microcomputer start ups did in the 80s.

    There is much value in the VoIP market but it is not to be found in selling products that only provide standard functions. A lot of people are going to lose a lot of money and a lot of people are going to have their careers destroyed in this new bubble.
    paolo.franzoi 12/5/2012 | 3:23:13 AM
    re: Session Controllers Stir IPO Interest
    I think I am probably one of the more radical people on this topic in terms of what is going to happen.

    VoIP will kill VoIP carriers. The model will dramatically shift. Let me give you my vision of where this is headed.

    Google offers a free registration service for your contact. This service can have adders like privacy and encryption added at a cost basis. People "click" or search for you. They contact request arrives at your derivative of a PDA, with a contact type selected. You choose your response from a menu (message me and will return, ignore, text, talk, etc.). Since there is a directory connecting you to the other side, the "talk" uses direct IP messaging between the two endpoints to start a "voice call". Much of the work is server based and free software based.

    I think people need to disabuse them of the notion of a specific carrier type. All of this "conversion" to an all IP network will seem like a silly notion 10 years from now. All these critical markets will fade to dust.

    seven
    dljvjbsl 12/5/2012 | 3:23:13 AM
    re: Session Controllers Stir IPO Interest
    VoIP will kill VoIP carriers. The model will dramatically shift. Let me give you my vision of where this is headed


    I don't think it will turn out quite as you predict. However, your vision seems to me to be a lot more probable than those being promoted by the telecom equipment manufacturers.

    Looking at them one is reminded of the dust covers that were sold for the first personal computers. This made them exactly like the typewriters that thye replaced. Somebody had to make these dust covers.

    Many of the people reading this will wonder what the comment above is about. They wil be too yopung to rememeber offices full of typewriters. All of which were all covered with dust covers after hours. This was only 25 years ago. Fancy electric correcting typewriters were competeing with dedicated word processors then. Not any more.
    paolo.franzoi 12/5/2012 | 3:23:11 AM
    re: Session Controllers Stir IPO Interest
    dljvjbsl,

    Thanks, I suspect I will be wrong as well. I am just trying to think through what looks to me to be a more likely scenario than that we copy the PSTN.

    I sit at my home PC logged into a Teamspeak server my friend is running. A group of us talk through that mechanism and it costs us zero dollars and zero cents. I think about my son having a "push-to-talk" button on his instant messanger or my chagrin about the cost of text messaging on his cell. Its funny. None of that stuff is counted as VoIP.

    The carriers and the equipment vendors are so reactionary to this movement that I can not see a good end for them out of this. Even "visionaries" like Vonage.

    seven
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