Procera Builds M&A War Chest

Deep packet inspection (DPI) platform specialist Procera Networks is raising more than $88 million from a new stock issue for general corporate purposes, including acquisitions.

Procera is offering 4.5 million shares at $21 each, a move that, after costs, will net the vendor $88.1 million if all the shares are sold by the closing date of April 25.

Currently, though, Procera's shares are being traded on the Nasdaq at $20.90.

The company is still a minnow but is growing fast. It's expecting to announce first-quarter revenues of around $12 million, up more than 70 percent from a year ago, when it reports its results in May. (See Procera Raises Q1 Forecast.)

And now, with some solid customer engagements providing it with recurring revenues, it has its eye on growing even faster. (See Procera Lands $2M Mobile Deal, Procera Touts US MSO Deal and Telekom Austria Picks Procera.)

"In addition to our primary focus on organic expansion, M&A is on our mind," CEO Jim Brear tells Light Reading in an emailed response to questions.

"Our technology has become a strategic technology within many service provider networks. We will seek to achieve technology synergy opportunities and TAM [total addressable market] expansion via partnerships, alliances and/or M&A. The goal is to respond to needs expressed by our customers as well as to expand our business. There are many possibilities. With the added capital, our ability to partner has increased," states Brear.

The company also needs to think now about expanding its portfolio into adjacent markets, as the DPI and policy control markets are only going to get tougher for specialist vendors such as Procera, according to a recent Heavy Reading report. (See Policy Specialists Squeezed by Vendor Giants and Policy & DPI: $1B Spree, But No Picnic for Vendors.)

So where might Procera be looking?

As it has a DPI platform that provides policy and charging enforcement function (PCEF) capabilities, it's possible that it might complement that by targeting a Policy and Charging Rules Function (PCRF) vendor or a charging/billing vendor. (See Nokia: The Missing Hero.)

More likely, though, Procera might look at a company that can provide it with video optimization, though RAN (radio access network) congestion control, or data analytics capabilities might also be of interest.

Among the specialist vendors that have developed video optimization technology are Avvasi Inc. , Bytemobile Inc. , Dialogic Corp. (Nasdaq: DLGC), Flash Networks , Mobixell Networks Inc. and Vantrix Corp.

But the video optimization target that would make most sense would be Intel Capital -backed Ortiva Wireless Inc. , which has already being deployed with Procera. (See Procera Adds Two More.)

Ortiva, though, is already being tipped to be a takeover target of another DPI specialist, Allot Ltd. (Nasdaq: ALLT), which, according to Azi Ronen's Broadband Traffic Management blog, is also believed to have recently held acquisition talks with Mobixell and Flash Networks.

— Ray Le Maistre, International Managing Editor, Light Reading