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.
"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.
"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.
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.
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'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
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