Veraz Aims for Backhaul

Long known as a voice company, Veraz Networks Inc. (Nasdaq: VRAZ) has its eye on data networking, which in turn would be the key to that favorite market of all telecom gear providers: mobile backhaul.

That could put an intersting spin on the company's pending merger with Dialogic Corp. (Nasdaq: DLGC), announced yesterday. The companies intend to combine, keeping the Dialogic name. Dialogic shareholders would get about 110 million shares of Veraz, a transaction worth about $111 million. (See Dialogic Grabs Veraz.)

Dialogic's business includes a focus on application enablement. The company has a lot of expertise in voice services, and from that base, it's trying to move into mobile video, says Dawn Hogh, Veraz's vice president of marketing.

Veraz likewise comes from the voice side, with its VoIP equipment and media gateways, and sees an expansion possibility in mobile networks: data delivery. If Veraz, with Dialogic, can become expert in data services, then the companies could bring the magical voice/video/data combination to carrier services, particularly on the mobile side.

Hogh says Veraz is already making that push into data. The company isn't revealing the specifics of its strategy, but Hogh points out that the place where data expertise would really come in handy is mobile backhaul, "where you don't have fiber and where you need to squeeze as much bandwidth as possible out of what you have."

That would mean both copper and microwave backhaul, and it would be an especially strong pitch for emerging markets, where fiber buildouts are less likely.

The idea for the push into data came at a customer's suggestion, and Veraz has been working with that customer on the necessary products for some time; Hogh won't say how long. She adds that details of the technology probably won't come to light for months -- possibly a sign that the flagship customer doesn't want to tip its hand to the competition.

Of course, the voice/video/data triad wasn't the sole motivation for the merger with Dialogic. There's a simpler reason: It had become clear that Veraz, as a public company with a valuation of just $44 million, would always have trouble getting an audience with Tier 1 service providers.

"We've been very outspoken that we've got to become a larger company," says Hogh. "And when you weight the costs of being a public company, these days, you need to have a larger top line and bottom line."

— Craig Matsumoto, West Coast Editor, Light Reading

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