VoIP Systems

Newport Networks up for Sale

It's been a drawn-out affair, but it looks as if the end is now in sight for British session border controller (SBC) vendor Newport Networks plc (London: NNG), which is looking for a buyer.

The Welsh company, which had pinned its hopes on carriers needing a high-end, hardware-based SBC for carrier-to-carrier interconnect points, issued an update to the London Stock Exchange Friday morning that noted how its directors are "extremely disappointed by recent trading and by the near term business prospects with the Group's current technology." [Ed. note: Waaaaaa!] Sales during the first half of 2008 have been "restricted to just maintenance revenues," and "losses for the same period amounted to approximately £4.3 million" (US$8.5 million).

That follows a 2007 loss of £8.6 million ($17 million), when the company generated negligible revenues. (See Newport Networks Reports 2007.)

An ongoing independent review of the company's prospects paints a bleak picture. It notes that carriers are going through "a very difficult period," and are delaying decisions about their next-generation network and IP Multimedia Subsystem (IMS) deployments, the "core network environment that the Newport Networks technology was designed to address."

As a result, the company's remaining engineers have been told to "concentrate on a mainly software-based product line, using industry standard computer platforms." The company, which currently employs about 50 people, added that "a further reduction in headcount and spending is inevitable."

The review also found that Newport's main product, its Border Gateway, is "now being challenged by developments undertaken by the main router vendors, whereby they are indicating to clients that they intend to add this capability to their existing products. This further undermines the Company's prospects. In addition, the development costs required to stay competitive in the Session Border Control sector are high."

Integrating multiple capabilities into edge routing platforms is all the rage among the key IP equipment vendors, with Cisco Systems Inc. (Nasdaq: CSCO) and Juniper Networks Inc. (NYSE: JNPR) having included SBC capabilities into their products for some time now. (See Cisco Integrates Session Control and Juniper Kills Its Session Controllers.)

All in all, bad news that nearly halved what was left of Newport's share price -- it fell by 0.2 pence to 0.225 pence, giving the company a market valuation of less than £1 million ($2 million).

Now the company's directors, led by serial telecom entrepreneur Sir Terry Matthews, are "looking for ways to turn the company around... The Board continues to look at all strategic options for the Company one of which could be an offer for the entire issued share capital of the Company. However, this review is at an early stage and there can be no certainty that an offer for the Company will be forthcoming."

The company's CEO, John Everard, told Light Reading he couldn't comment further as he is bound by the London Stock Exchange's strict "Takeovers and Mergers" code.

Decline and fall
Newport has been struggling almost since its May 2004 IPO, which was successfully executed even before it had launched a commercial product. That didn't seem to matter much, as the company was in the thick of a growing and important niche market, and its share price grew from its initial offer price of 71 pence to 133.5 pence within a few months. (See Session Controller IPO Scores Success, Newport to Ship Session Controller , and Report: Session Controllers in Demand.)

But in its four years as a public company it has failed to land any significant business, though it's kept its head above water by cutting costs and raising more cash while it looked for the right mix of technology and marketing that would bring in some life-saving business. (See Newport Edges Towards Target, Newport Needs Another $27M, Newport Sinks & Shrinks , Acme Profits as Newport Shrinks, Crunch Time for Newport, Signs of Life at Newport, and Newport Needs More Cash.)

All the while, its main rival in the SBC market, Acme Packet Inc. (Nasdaq: APKT), was sweeping up most of the Tier 1 carrier business and went public itself in October 2006. Acme's had its ups and downs as well. [Ed. note: It's been kept afloat mainly by its longstanding contract with Wile E. Coyote.] (See IPO News: Acme Soars, Neuf Preps and Acme Packet Gets Jittery.)

In recent months Newport struck a reseller deal with Nokia Networks (still not officially announced) that it hoped would kick-start some Tier 1 carrier sales. (See Nokia Siemens' Lifeline for Newport.)

But only weeks ago, Newport announced it was surviving on a loan from Chairman Matthews and was looking for a new CEO. (See Newport Clings On.)

Now, it seems, the search is for a new owner rather than a new chief executive.

— Ray Le Maistre, International News Editor, Light Reading

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