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Taqua FAQua

Phil Harvey
5/18/2007

5:30 PM -- From The Philter's Softswitch Soap Opera file, here's an FAQ that should bring you up to date on the happenings at the new (old) Taqua, as I understand it.

Q: When was Taqua founded and what does it do?
A: Taqua was founded in March 1998 and, that month, it announced itself to the world as having "a revolutionary new open architecture that will provide the 'missing link' between today's carrier voice and data networks."

The company started as a next-generation Class 5 switch maker and, as it evolved, it added VOIP functionality and data interfaces. Its mandate all along has been to give Tier 2 and Tier 3 carriers a way to replace their legacy voice switches with gear that lets them migrate to data (now VOIP and IMS) networks without giving up completely on their traditional TDM phone businesses. The company's products generally are aimed at replacing central office switches in networks that serve anywhere from 600 to 80,000 subscribers.

Q: Missing link, eh?
A: Yeah. Well, we said the company's switch had evolved.

Q: How did Taqua do as a startup?
A: It survived and kept attracting investors, which says a lot for a company founded in 1998. In February 2004, Tekelec bought Taqua for about $85 million in cash and some other considerations that took the closing purchase price closer to $92 million. That was a few bucks short of the more than $140 million the company had raised in venture capital money during its lifetime.

Q: How did Taqua fare as part of Tekelec's switching business?
A: Not well. Insiders say Tekelec didn't support the product and mismanaged the switching business overall. Sales suffered and competitors like Metaswitch Networks had a field day. In February 2006, Tekelec took a $22.7 million charge against earnings, a good bit of which was related to the write-off of "Taqua purchased technology." The company took another $28.6 million charge related to "the impairment of the goodwill associated with the Taqua reporting unit."

At that point, analysts said the Taqua business had only been generating about $2 million to $3 million in revenues per quarter. Taqua's yearly revenues in 2003 had been as high as $16.3 million, so times were, uh... tough.

Q: What happened then?
A: Things were going so well that, by March 2007, Tekelec sold all of its switching business (which included Taqua) to Genband Inc. Tekelec took a 19.9 percent common equity interest in Genband as part of the transaction. Genband paid $1 million in cash for the whole pile.

Q: So a company that once raised a collective $140 million in venture funding was, as of March 2007, not even able to fetch more than $1 million in cold, hard cash?
A: That's the way it looks on paper.

Q: So how did Taqua fare under Genband?
A: Well, it left. This week, Genband sold Taqua, its maintenance business of some 300 switches, and its product portfolio, for an undisclosed sum to a group of investors led by a Dallas real estate developer, Gerald Harris Stool, pardon the expression. The Taqua board includes Stool; Eric Pratt, who managed the product at Tekelec; and Scott Weidenfeller, former chief marketing officer at Tekelec. Everyone on the board is also an investor in the company.

Q: How big a stake does Genband have in Taqua?
A: Not sure. Maybe none.

Q: Now that Taqua is a standalone company again, who are its competitors?
A: MetaSwitch, Nortel Networks Ltd. , and CopperCom are still slugging it out in the space. Taqua's new brass say the small office switch market for North America will hit about $148 million next year. If it can grab 10 percent of that space, the 40-person firm will be laughing.

Q: What are its chances of succeeding?
A: Well, that depends on what kind of returns its investors want (and how soon they aim to make their money back). A $14.8 million year for Taqua, as projected by its managers, would be its best in years. And, the company will have to hope Nortel doesn't suddenly decide to go nuts replacing its DMS-10s with CS 1500s. Also, Taqua's sales team will have to give carriers a reason not to embrace MetaSwitch's VOIP architecture, in which a centralized call agent manages a number of media gateways nearer the edge of the network.

Q: Why would a carrier choose Taqua, given its rocky history?
A: The company's management says Taqua is stable again. And they say Taqua will "not focus on being acquired or launching an IPO…" Also, VP of sales Todd Daniels will wash and detail your car.

Q: No IPO prospects? Are they serious?
A: You're right. It's probably reverse psychology. I'm going to check for an S-1 right now.

— Phil Harvey, Switcheroo Editor, Light Reading

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telecom_blues
telecom_blues
12/5/2012 | 3:08:08 PM
re: Taqua FAQua
What effect will the "new" Taqua have in the class 4/5 market? When they were trying to survive on negative dollars they had Dave Long at the software helm. When they were trying to survive by giving away their product they had Todd Daniels at the sales/marketing helm. When they were claiming that their sales numbers were about to explode into a glorious mountain of dollar bills they had Charlie Vogt at the top of the heap. Now, Charlie has bought back his beloved Taqua from the grip of the Tekelec pirates and has quickly disposed of it to a team of unwanted management for 84 million less than what he sold it for. OK, chalk one up for Charlie. Nice move. Wish I could have been the one to make this financial windfall move. The disposed of part is interesting considering he essentially dumped Taqua into the hands of those upper level, highly paid, and under-achieving managers that he didn't want at GenBand. This is essentially the same management team which he was leading when he dumped this beast the first time. With the exception of Eric, it's the same faces with the same philosiphy and the same lack of understanding of how to make this pig dance.

Look closely at what comprises of the upper management team. Look at their background and find out why they are currently where they are. We all remember Frank Plastina, who got fired from Nortel because four years earlier he pronounced that VoIP was just another dying idea and that it would be in Nortel's best interest to stay away from it. Nice call Frank. Now it's the same Frank that came to Tekelec with the same mentality towards class 5 customers and convinced a completely confused and bewildered board of directors that the only way to succeed it to break apart the company and to focus on their bread-and-butter product; the Eagle. Nice vision Frank and company. And this is the same man that brought along all his ex-Nortel buddies to the greener grasses of Tekelec only to dump them into the Jaws of Charlie's GenBand. Guess the honeymoon is over.

I'm not about to drop my money, my reputation, my livelyhood, my kids college fund, my wife's anniversay gift, my house payment, and the future of my company and all those faithful employees that look to me for leadership and guidance into a company that more resembles a bleeding-heart soap opera than it does a high-tech telecommications company....I don't think so. If Taqua ever wishes to be a player in the real world it will have to understand some basic business principles:

(1) Without a profit you have nothing.
(2) If you re-use the management that got you here in the first place then you will end up with the same results.
(3) If you use one engineer for 16 hours as opposed to two engineers for 8 hours each then you will lose the ones that help you survive.
(4) If you ignore your customers, they will leave.
(5) If you sell your neighbor a new Lexus for $40 then your other neighbors will expect the same deal. It's a small neighborhood and they ALL talk.
(6) If you think that by driving a Hummer is impressing your customers then you are a fool.
(7) Getting new money does not equate to new success. You still need to execute.
(8) Having a third of your employees as managers is stupid. Simply an attempt to cover up multiple levels of incompetence.
(9) Quickly learn when to walk away from a sale.

Just to keep the record straight, I am not an employee of Tekelec or GenBand or Taqua although I do have friends employeed by all three. There was a time when I was a proud member of the Taqua family but Frank and company saw to it that the days of pride and ambition are long gone. Tekelec, a wonderful company with a long history of success, just did not have a clue what it was being suckered in to. Again, I salute Charlie for his ability to sell snow to eskimos.

What does this "new and improved" Taqua being to the world of Class 4/5? Can't say I have the answer but what I can tell you is that if it sounds like a duck and walks like a duck and smells like a duck then it must be a pig. Go figure.
Lite Rock
Lite Rock
12/5/2012 | 3:08:07 PM
re: Taqua FAQua
You have given us a clue as to the reason for your bitterness. I will not dwell on that aspect of your post. I think you have pointed out some of the great truths in the Taqua, Tekelec, Genband story, but I think you have assumed too many simplistic causal relationships in your analysis. On an emotional level your assertions make more sense, it is just not that simple or clear cut.

You have taken the musings of Phil "The bachelor" including his error in mingling the Santera, Vocal data and Taqua purchase by Tekelec, then applying only the Taqua dollars to the Genband purchase of all three of them.

Here is a guesstimate:
Tekelec bought Santera for ~ $103.6 million
Tekelec bought Taqua for approximately $92 million.
Tekelec bought Vocal Data for ~ $ 27.5 million

Genband buys what Tekelec paid $223.1 million for 1 million and a 19.9% stake in Genband. What is 19.9 % of Genband worth? Bottom line, it is not public what Taqua II cost to break free.

On the Surface Vogt looks like a genious. He is in my opinion just an overcontrolling opportunist. A monitarily successful one, but one none the less.

You want to rip Plastina when it was Fred Lax at Tekelec that called all the shots and failed to integrate the companies. Santera folks obviously felt threatened by Taqua. There was a 75,000 port capability overlap in their eyes (based on Tekelec's marketing) and that meant that they would never respect or fully cooperate with Taqua. There is no "Santera" in "Team".

Who was in charge of operations at Santera after they were acquired by Tekelec? What are the odds that they helped to bring things down? Just like they did after Alcatel/DSC.

Tekelec was destined to fail at bringing these acquisitions together because they (Lax) did not understand or embrace what it takes to make this new business model work. It is equipment and customers that require a simple yet attentive approach to succeed. Tekelec only knew how to deal with the relatively big and expensive Eagle STP.

It is time now that the bumblers and control freaks are out of the way for Taqua II to get down to taking care of customers. I can't say that I share many of your doubts.

For the record; I am not employed by any of the aforementioned companies. I just think there is more than enough blame going around these days.

I wonder if Vogt wanders the aisles of Genband smacking that bat in his hands? :O

Cheers :)
telecom_blues
telecom_blues
12/5/2012 | 3:08:06 PM
re: Taqua FAQua
I'm afraid you've caught me with my professional shield lowered. My attempt at disclosing my doubts about the new Taqua's future has instead exposed weaknesses in my personal traits. It won't happen again. On a personal level, I wish no ill will towards Taqua nor it's employees. With regards to pass blaming, you are correct in as there was/is plently of blame to go around.

I never mentioned Fred because I believe he either knew he did not posses the skills needed to integrate the 3 switching companies into a single entity or Tekelec did not think he possesed the skills. Perhaps he just did not care enough to do it. I'm not sure Fred even wanted this to happen. When he was at the helm the company appears to have been headed in the right direction. The quarterly numbers were on the up swing and the orders were rolling in. Unfortunately, in order to make those numbers it would require the installation of 1.5 switches per business day and that is not acceptable. I don't really know why Fred left. What the employees were told was that he did not want to relocate and perhaps it was that simple.

When Frank joined the company I don't recall a single engineer expressing any joy. Personally, I did not know the man so my thoughts were vacant. I had hoped he was a man that could successfully integrate companies and lead it into the black. But it became quickly apparent that his primary focus was to set un-abtainable numbers and then cut employees to reach them. This will work for a cut or two but eventually you will run out of enough employees to even run the technical portion of the company. Now was this Frank and/or the Board? Considering his past business activities it did appear to fit within his management style.

So what's done is done. Taqua is now on its own (albiet with the help of a real estate investor). They no longer report to a board nor do they need to be concerned with the integration of multiple entities. All they need to do is convince the rest of the telecom world that they can deploy and support a viable and affordable product yet continue to perform business as usual for the next umpteen years. It's possible but not probable. There are simply too many variables against them:

(1) Potential customers will have a difficult time trusting that the Taqua product they purchase will be supported next year.
(2) Taqua has actually gone back to who they were pre-Tekelec days and that was a difficult time financially.
(3) Taqua dependence on the Vocal Data product will make the support for this interface difficult at best.
(4) Taqua management continue to believe that a company can be successful as long as you have a lot of management in place. You must perform technically to succeed.

It's easy to sit back and point out what's wrong with a company. The true challenge is to point out solutions.

(1) Taqua must meet with every existing customer and explain to them their direction and convince then that they are here to stay.
(2) Taqua needs a business plan that discloses they method of reaching profitability. They must sell their product for at least 17% profit to be successful. Customers that aren't willing to accept the fact that a profit must be made should not be a customer.
(3) Taqua must quickly find a workable replacement for the Vocal Data product. Don't try and buy it from Charlie. If you do you will get your feelings hurt. You better learn to compete against Vocal Data.
(4) Stream-line management. Tap into the strengths of your existing management team. Dave Long is a very good software design leader so don't have him tied up in budgeting meetings all day. Todd Daniels knows how to sell but don't let him give your product away. Weidenfeller (sp) is an amazing individual and is one of the few gems of this new Taqua. Don't hold him back.
(5) Apologize to your employees for all the lies you told them because either Frank, or Fred, or Charlie or someone told you to. The employees are looking for other jobs because they no longer trust you. And if you think you can manage this company without them then just let them all go. Gain their trust back.
(6) Re-visit your technical solutions. All existing deficencies can be overcome but it will take someone with technical vision. This is where it would be nice to have Mr. Andrew B. back.
(7) Search long and hard for a company leader with a proven track record. It must be someone that the industry trusts. Look at Cisco first. All of your customers know Cisco and are actually in awe of them (go figure). Being led by someone from Nortel or Alcatel will not instill that instant trust needed to begin growing releationships with your customers.

I'm sure I can come up with many more potential solutions for success but I should leave some for the new management. Embrace this opportunity and remember; this is like a start-up with an existing customer base. COOL!

DCITDave
DCITDave
12/5/2012 | 3:08:03 PM
re: Taqua FAQua
re: "Bottom line, it is not public what Taqua II cost to break free."

Well that's kinda what I said.
Lite Rock
Lite Rock
12/5/2012 | 3:08:01 PM
re: Taqua FAQua
Hey Phil,

Re: "Well that's kinda what I said."

I agree with you and that is why I was saying it in my response to telecom_blues.

The confusion I alluded to in my response had to do with the following from you:

Q: So a company that once raised a collective $140 million in venture funding was, as of March 2007, not even able to fetch more than $1 million in cold, hard cash?
A: That's the way it looks on paper.

Technically you are correct, but it can easily be misunderstood as Telecom_blues did in his statement below:

"Now, Charlie has bought back his beloved Taqua from the grip of the Tekelec pirates and has quickly disposed of it to a team of unwanted management for 84 million less than what he sold it for. "

The picture is actually much worse as I detailed in my note. Given the original breakdown of money paid by Tekelec for all three companies and the resulting amount Tekelec them for, what is the real amount that Genband paid for each company?

That is why I asked what 19.9% of Genband is worth.

Can you/will you do an estimate for us?

Pretty please!

Cheers,
DCITDave
DCITDave
12/5/2012 | 3:07:59 PM
re: Taqua FAQua
re: "That is why I asked what 19.9% of Genband is worth.

Can you/will you do an estimate for us?

Pretty please!"

Looking into it.

ph
alchemy
alchemy
12/5/2012 | 3:07:55 PM
re: Taqua FAQua
Audiocodes bought NuEra for $85 million. In a world where all the big guys offer vertical solutions, what is a media gateway company with a vertical integration story du jour worth? They only recently announced shipping their millionth media gateway port so you know their sales are not exactly setting the world on fire. The real money is in the application and the system integration. A media gateway is a commodity product with declining margins. They have better traction than NuEra ever did but I don't see that you could value Genband at more than 2x or 3x NuEra given where they live in the food chain and their likelyhood of getting significant revenues from non-media gateway products.
jumpintownlake
jumpintownlake
12/5/2012 | 3:07:25 PM
re: Taqua FAQua
Hard to tell how to value 19.99% of GENBAND. Not even the company knows what they have in terms of product these days.

They announce worldwide leadership in gateway ports - http://www.genband.com/news_pr... - but you can't find the product in either the solutions or products tab on their own website.

Now that's crack marketing.
taqua
taqua
12/5/2012 | 3:07:02 PM
re: Taqua FAQua
"Todd Daniels knows how to sell but don't let him give your product away."

I almost fell off my chair when I read this. That's like saying Jeffrey Dahmer knows how to cook.

Ask the folks at Eagle Broadband about Todd's skills. He was something like Oh for two years there. I'd bet he more likely replicates that feat at the 'new' Taqua.
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