Ditech's Itsy Bitsy Jasomi Deal
CHICAGO – Supercomm 2005 – Ditech Communications Corp. (Nasdaq: DITC) has scooped up session-border controller startup Jasomi Networks for the less-than-eye-popping sum of $20 million.
That yields a natural follow-up question: Why was Jasomi sold for less than a third of the price that fellow session border controller startup Kagoor got from Juniper Networks Inc. (Nasdaq: JNPR)? (See Juniper to Acquire Kagoor.)
Kagoor and Jasomi were among the buzz-worthy group of VOIP session border controller startups, and the two had comparable revenues of a few million a year (see Session Controllers Stir IPO Interest). Yet Kagoor sold for $67.5 million in cash, while Jasomi sold for only $20 million in cash and notes (see Report: Session Controllers in Demand).
The answer may be the size of the investors. Jasomi was funded by a group of angel investors and thus facilitated an easier and smaller exit than larger VC-backed startups.
"Kagoor was VC-funded, and Jasomi was funded by angels, so I think there were greater expectations for the value of Kagoor," Ditech VP of marketing Chalan Aras says (see Valley Wonk: The Indie Startup). "The amount of funding that had been put into Kagoor was about 10 times more than Jasomi."
Aras says Ditech had been looking at session border control products since the VON show in March. When Light Reading asked Jasomi if it was in acquisition talks at the time, company officials would not confrm or deny.
"We wanted to pick up a good product without paying for a lot of sales and marketing overhead in a company," Aras says. All 23 Jasomi employees will be retained by Ditech, he adds. "They were all muscle and no fat."
Ditech is a recent entrant into the packet voice space. The Mountain View, Calif.-based company's core business is in devices that sit at the edges of wireline and wireless networks and ensure the quality of voice signals. In packet-based networks, Ditech's devices examine voice content leaving or entering the VOIP network and measure for quality or packet loss. Session border controllers inhabit the same areas in the VOIP network and negotiate the passage of VOIP packets safely back and forth between external networks.
Ditech says it will continue selling the Jasomi Peerpoint session border controller, but it will work to integrate the technology into its new Packet Voice Processor (PVP) platform, which Ditech released at the VON show (see Ditech Intros Packet Voice Processor).
"Not many people picked up on it at the time, but at VON, when we announced PVP, we said our postion was to offer a broad range of border services for voice services," Chalan says.
Jasomi sells its session border controllers to carriers, enterprises, and service providers; its revenues are estimated at a few million a year. The acquisition of Jasomi could give Ditech more expertise and, perhaps, credibility, in the packet voice world, which could yield long-term dividends.
“Our view is Jasomi would complement the recently announced PVP product,” says Lehman Brothers analyst Marcus Kupferschmidt. “We have previously suggested Ditech could potentially develop the PVP into an SBC or media gateway, so it appears Ditech is looking to buy versus develop in house at this point.”
Ditech’s PVP was released in March, and the company has yet to announce any customers for the product. However, Kupferschmidt expects it to begin generating revenue in the first quarter of 2006.
At least one of Ditech's competitors was not suprised by the acquisition. "They have been looking for an exit strategy for a long time," says NexTone Communications Inc.'s Dan Dearing.
The Jasomi purchase is expected to close by the end of June.
— Mark Sullivan, Reporter, Light Reading