Sylantro Ready to Garnish Public Markets

IP Centrex platform vendor Sylantro Systems Corp. is aiming for an IPO late this year or in early 2006, according to a senior executive at the firm.

The vendor has been experiencing rapid growth in recent months, having added 11 new customers in the fourth quarter of 2004, including four Tier 1 operators, according to VP of marketing David Illing (see Sylantro Lands New Customers, PowerNet Uses Sylantro for VOIP, and Lightyear Uses Sylantro for VOIP).

It is also believed to be on the verge of breaking more new accounts (see Time Warner Talk Fuels Sonus).

But Illing says the firm "doesn't need any more funding to reach profitability" or to meet immediate growth plans. However, the company is "looking at going to the public markets at the end of this year or in early 2006" to secure its financial position and provide a return for its investors.

The move should shock few in the industry. Heavy Reading chief analyst Scott Clavenna identified Sylantro as a likely IPO or acquisition target in a major report, "Telecom Recovery Investment Opportunities," last March (see Heavy Reading: Startups on the Rebound).

Illing says Sylantro now has 55 customers, including 11 Tier 1s such as Qwest Communications International Inc. (NYSE: Q) and SBC Communications Inc. (NYSE: SBC), and is on course to achieve profitability in mid-2005 (see Qwest Uses Sylantro for VOIP Service and Partners Garnish IP Centrex Dish).

He says the market for hosted IP service platforms is expanding quickly (see Carrier VOIP Gear Sales Hit $450M). "We beat all our expectations in the fourth quarter. The 11 new deals covered all five continents and were won through a variety of partners, including Alcatel and Siemens Communications."

He adds that Sylantro has been able to cope with the demands of that accelerated growth by having overseas resources, including a development center in India.

Will Level 3 Communications Inc.'s (Nasdaq: LVLT) decision to exit the hosted VOIP market will have any impact on Sylantro's numbers? (See Level 3 Provides VOIP Lesson.)

"We derive our revenues from a broad base of customers now, and we continue to have a strong business relationship with Level 3, which is still an important customer," says Illing, who notes that the carrier's HomeTone service is delivered using a Sylantro system.

Sylantro is one of the key players in the IP Centrex platform market, along with BroadSoft Inc., VocalData Inc. -- which was acquired by Tekelec Inc. (Nasdaq: TKLC) in 2004 -- European player NetCentrex SA, and Ubiquity Software Corp. (see Tekelec Connects With VocalData, Highdeal, NetCentrex Announce Contracts, and Endavo Uses Ubiquity for VOIP).

Rumors surrounding a planned acquisition of Broadsoft by Lucent Technologies Inc. (NYSE: LU) swept the SuperComm exhibition floor last summer, but although Lucent snapped up a softswitch player, it hasn't yet extended its VOIP-related M&S activity into the IP Centrex market (see Lucent to Buy Broadsoft? and Telica: Lucent's Good Buy).

Broadsoft has also had a recent spurt of customer activity, having named four new customers in the past week alone (see Cbeyond Picks BroadSoft , iiNet Offers VOIP With Broadsoft, BroadSoft Lands McLeod Deal, and XO Picks BroadSoft's VOIP Apps).

Sylantro, currently perched in ninth place in Light Reading's Top Ten Private Companies, has raised $97 million to date from investors such as Accel Partners, BCE Capital, Mayfield, and Vanguard Venture Partners. Its latest round was in November 2003, when it raised $19.5 million in its fourth round, which included a $4.5 million top-up from Argo Global Capital LLC (see Sylantro Pockets $15M and Sylantro Raises Extra $4.5M).

— Ray Le Maistre, International News Editor, Light Reading

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