Two VOIP Chip Players Diverge
Brecis Communications Corp. and Ishoni Networks Inc. shared a common mission: combining voice over IP (VOIP) and related functions into a single chip. What's the difference?
Well, yesterday Brecis announced a Korean OEM deal worth $15 million during the next two years. Ishoni, meanwhile, appears to be running on fumes.
Brecis got started in 1999 and Ishoni in 1998, both targeting the gateway routers that sit on the customer side of a broadband connection. Each company's chip was intended to be the heart of such a gateway, cheaply integrating the elements required for typical gateway functions such as VOIP or security.
The VOIP market was slow to emerge, however. Brecis managed to escape into the security market for a while. Ishoni wasn't so lucky.
An employee confirmed that Ishoni's Santa Clara, Calif., headquarters is all but deserted, with all staff gone save for customer service. Layoffs of the 40 or so California employees happened sometime in the last two months, with control of the company shifted to Bangalore, India, home of Ishoni's software division and more than 100 employees.
But when Light Reading called the Bangalore office recently, an employee said the entire staff had departed in mid-May. That includes Vivek Mansingh, vice president and managing director, who had become the de facto head of the company once the Santa Clara office was gutted.
A spokesman for Philips Semiconductors -- whose parent, Royal Philips Electronics NV (NYSE: PHG; Amsterdam: PHI), bought a 51 percent stake last year (see Royal Philips Bankrolls Ishoni) -- says the company continues to operate as an independent entity. He wouldn't comment on the nature or size of the remaining staff, nor would he explain what had happened to the Bangalore office.
Philips reportedly is interested in buying the technology -- which, as the spokesman confirmed, is in Ishoni's possession. Meanwhile, Ishoni executives were trying to strike a better deal. One prospective buyer was approached by an Ishoni official, offering to sell the intellectual property for $1.5 million. "I think they're trying to start a bidding war with Philips," says the prospect, who turned Ishoni down.
The latest rumor is that Ishoni's founders are starting a new company to apply the technology, away from the shadow of Philips. The Philips spokesman wouldn't comment. Attempts to contact Ishoni board members and executives were unsuccessful.
Brecis Lives On
On the greener side of the fence, Brecis reported some success in its attempts to get its VOIP business rolling.
Its new deal involves selling chips to Korean Firm Syspol Co. Ltd., whose boxes will be added to the Indonesian cable plant operated by PT Telekomunikasi Indonesia Tbk. (Telkom).
The goal is to add VOIP to the cable plant. It's a milestone for Brecis because the company hasn't had much success in the VOIP market so far.
"VOIP is really small at this point, but it's a segment we see growing," says George Alexy, Brecis president and CEO. He says Brecis has other VOIP design wins that haven't been disclosed.
Brecis's original game plan called for a chip combining VOIP, security, and quality of service (QOS), with the emphasis on VOIP, but that market was slow to materialize. Meanwhile, Brecis found customers interested in subsets of the chip -- the security functions in particular -- and wound up selling stripped-down versions of its flagship MSP5000.
It's those smaller markets that have kept the company afloat. Brecis's largest market right now is the wired and wireless routers that use its security chips. VPN appliances rank second -- again, using the security chips -- with VOIP a relative trickle.
To bolster its VOIP position, Brecis yesterday released VOIP software for its four-port MSP4000 and eight-port MSP5000. The company also announced a new chip, the two-port MSP2020 for VOIP gateways.
The functions inside the MSP chips aren't unique to Brecis. It's the integrated package that gives Brecis the advantage, so it's almost certain that competition will arise.
"They're definitely the furthest along in terms of integration," says Linley Gwennap, principal analyst with consulting firm The Linley Group. "We'll probably see some of the larger companies like Motorola and Broadcom piecing these things together because they have all the pieces."
That could be a problem for Brecis, especially since the company's stripped-down chips are its best sellers so far. It would be fairly easy for a competitor to build similar versions of those chips, whereas a more densely integrated chip would be tougher to reproduce.
Brecis isn't profitable yet, but the $15 million from Syspol should make the company self-sufficient, Alexy says. The company also raised $20 million this year in a round led by Crosslink Capital (see Brecis Garners $20M), bringing its total funding to $72 million. Its staff numbers around 60, following recent cuts of roughly 15 percent (see Headcount: Behold! A Wooly Yak!).
— Craig Matsumoto, Senior Editor, Light Reading