Softswitch Vendor Dodges Bullet
Just as stricken softswitch-maker Clarent Corp. looked set to finally turn up its toes, along comes Verso Technologies Inc. (Nasdaq: VRSO) to cheat the grim reaper of his booty.
Verso, a small ($10 million per quarter) voice-over-IP equipment and services company, has gotten the go ahead from a bankruptcy court to buy the business assets of Clarent for $9.8 million. The deal should be made final by February 13.
Verso first announced its acquisition plans on December, 16, 2002 (see Verso to Acquire Clarent). Clarent, which has been investigated for over a year for accounting irregularities, filed for Chapter 11 bankruptcy protection when the deal was first announced to help facilitate the process. In the filings, the company, once valued at $3 billion with over 1,000 employees, cited the state of the telecom industry, litigation, and other obligations as its reasons for seeking protection.
The addition of the Clarent assets could allow Verso to more aggressively target service provider accounts and compete with the likes of Sonus Networks Inc. (Nasdaq: SONS), Cisco Systems Inc. (Nasdaq: CSCO), Santera Systems Inc., and Telica Inc., which offer softswitches that replace older class 4 and class 5 circuit voice switching gear.
Verso has acquired several companies in its 19-year history. It has primarily focused on providing SS7 media gateways and other VOIP software products, along with its services division that addresses the enterprise and low-end service provider market. But the company has been looking to beef up its service provider offering. Currently, competitors like Sonus offer both an SS7 gateway and softswitching. In order for Verso to compete it needs the second piece of the puzzle. And this is where Clarent enters the picture.
Still, it won’t be an easy market to crack. Carriers large and small are struggling. For example, Sonus, the only publicly traded company that focuses on softswitches, reported revenues of $12.7 million for the fourth quarter of 2002 compared with $38.9 million for the same quarter a year earlier (see Sonus Reports Q4).
Kevin Mitchell, an analyst with Infonetics Research Inc., says the total revenue for softswitches and media gateways declined about 9 percent in the third quarter of 2002. Figures for the fourth quarter are not yet available. As for the future, he says that most service providers don’t expect to deploy VOIP until at least 2004.
Even though some consolidation has occurred, there are still far too many players, Mitchell says. “Verso will be hard pressed to make inroads in cable or telco accounts. There are really only about five or six providers to target in each country, and every company is going after the same ones.”
— Marguerite Reardon, Senior Editor, Light Reading