AudioCodes Rakes Netrake

Sources within AudioCodes say the company has reduced the headcount at its Netrake session border controller significantly

September 8, 2008

3 Min Read
AudioCodes Rakes Netrake

The session border controller (SBC) market has contracted a little further following a decision by VOIP equipment vendor AudioCodes Ltd. (Nasdaq: AUDC) to cut its former Netrake operations down to just a handful of people, according to sources inside the company.

That would leave Acme Packet Inc. (Nasdaq: APKT) as an even stronger market leader (about 50 percent market share) in the SBC space, which, according to the Dell'Oro Group , was worth about $215 million 2007. Even Acme, though, is facing some financial challenges. (See Veraz Spirals Downward and Acme Packet Declares Lead.)

Several AudioCodes employees have contacted Light Reading with news of significant job cuts at the company's site in Plano, Texas, where the Netrake business has been housed since it was bought for $13.8 million in July 2006. (See AudioCodes Takes Netrake.)

Since then, AudioCodes has been working on integrating Netrake's SBC and security gateway capabilities into some of its media gateway products, as well as continuing to sell standalone products, though analysts identified some potential sales weakness soon after the acquisition closed. (See AudioCodes Warns; Analysts Blame Acquisitions, Netrake Touts Products, Customer, and Netrake Claims Milestones.)

Now it seems those weaknesses have resulted in a significant headcount reduction. One employee, who says he is among those being cut, says the Netrake workforce is being reduced by about 70 percent. While it's unclear exactly how many staff that involves, it's understood that between 35 and 40 were affected.

The source notes that, while the staff knew the market for SBCs and security gateways was not great, "we never expected cuts like this... Everyone is in shock."

Another source suggests the former Netrake business has effectively been closed.

AudioCodes declined to comment on the situation, saying only that it doesn't comment on individual business lines. However, news of job cuts at the Plano site were independently confirmed, though the number of staff being laid off could not be verified.

While the SBC market is now dominated by Acme Packet Inc. (Nasdaq: APKT), challenged mainly by Sonus Networks Inc. (Nasdaq: SONS) with its standalone products and Cisco Systems Inc. (Nasdaq: CSCO) and Juniper Networks Inc. (NYSE: JNPR) with their router-housed capabilities, it once faced serious competition from a number of specialist rivals, including Netrake, Kagoor, and Nextone. (See XO Picks Sonus, Cisco Catches Integration Fever, Netrake Lands Telefonica, and Report: Session Controllers in Demand.)

But as Acme grew, and went public, so its rivals were acquired, merged, or, in the case of Newport Networks plc (London: NNG), failed to make any impact. (See Juniper to Acquire Kagoor, Juniper Kills Its Session Controllers, Newport's Last Stand, Newport Networks up for Sale, NexTone, Reef Point (Finally) Merging, and What's NextPoint's NextMove?)

Now Acme is the clear SBC leader, though the overall market is clearly suffering currently from some of the capex hiccups that are affecting other industry sectors. Research house Infonetics Research Inc. just reported that the session border controller segment experienced its first-ever sequential decline, and a double-digit decline at that, in the second quarter of this year, "due to a pause in deployments in North America and Europe where large service providers are maxing out their installed base rather than purchasing new equipment." However, Infonetics expects "it to pick up nicely in the second half of the year,” stated principal analyst Stéphane Téral in his recent public release on the VOIP equipment market.

— Ray Le Maistre, International News Editor, Light Reading

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