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RadiSys to Acquire Convedia for $105M

Light Reading
News Analysis
Light Reading
7/27/2006

Canadian media server company Convedia Corp. is being acquired by Oregon-based Radisys Corp. (Nasdaq: RSYS) for $105 million in cash, the companies announced late Thursday.

RadiSys is best known for the ATCA blades it sells to large OEMs and integrators, such as Nokia Corp. (NYSE: NOK), which then add applications software. (See RadiSys Expands ATCA Line.)

With the acquisition of Convedia's technology and expertise, RadiSys can now pre-load media processing capabilities on its hardware. The companies make clear, however, that RadiSys will continue selling free-standing, turnkey media server boxes to carriers.

The deal also gives RadiSys an IP Multimedia Subsystem (IMS) pitch, as Convedia developed its media server technology to conform to IMS standards.

IMS is a network architecture that allows services from multiple wireline and wireless networks to be combined and delivered to any wired or wireless end point. (See IMS Guide and Convedia Touts IMS Forum.)

In an IMS network, media servers perform the Multimedia Resource Function (MRF) -- sourcing, mixing, and processing media streams. (See Who Makes What: VOIP Infrastructure Equipment.)

Convedia says it's seen strong sales of its media servers, as carriers -- especially in Europe and Asia -- migrate their networks toward IMS. Convedia says it has deployed its media servers in the networks of 200 customers globally, including 25 of the top 50 global telecommunication service providers. (See Alcatel Names Its 21CN Partners.)

A number of those deployments have come through the vendor's reseller agreements with the likes of Alcatel (NYSE: ALA; Paris: CGEP:PA), Siemens AG (NYSE: SI; Frankfurt: SIE), Huawei Technologies Co. Ltd. , and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763), among others. (See Alcatel Selects Convedia .)

Many of Convedia's customers bought the servers for use in networks that support retail and wholesale VOIP services. These customers include SunRocket Inc. and Net2Phone Inc. (Nasdaq: NTOP). Convedia says its servers have been sold to a number of unannounced Tier 1 carrier customers. (See XO Deploys Convedia Kit and PointOne Picks Convedia Media Servers.)

Since its inception in 1996, Convedia has raised approximately $50 million in venture capital funding. The company's investors include Sir Terry Matthews, who has a number of other VOIP-related investments, including session border controller vendor Newport Networks plc (London: NNG), and application server company Ubiquity Software Corp. (London: UBQ). (See Session Controller IPO Scores Success and Ubiquity Moves Closer to AT&T.)

After the sale, Convedia stakeholders can earn an additional $10 million if the company hits certain undisclosed sales targets, according to the statement.

The transaction is expected to close by the end of the quarter. RadiSys believes Convedia's business will be accretive to its earnings within the first 12 months, excluding acquisition-related expenses.

RadiSys, which also reported its second quarter results Thursday, saw its share price rise by 10 cents, about 0.5 percent, to $20.46 in after-hours trading. (See RadiSys Reports Q2.)

— Mark Sullivan, Reporter, Light Reading

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