The news is not unexpected as the Broadband Traffic Management blog reported two weeks ago ago that Allot was close to a deal for the Intel Capital -backed Ortiva.
Deep packet inspection (DPI) specialist Allot said the addition of Ortiva's video optimization capabilities will help its service provider customers manage video traffic on their mobile networks. (Video traffic accounts for 42 percent of mobile data traffic according to the vendor's most recent Global MobileTrends Report.) Allot will integrate Ortiva's technology into its Service Gateway platform and offer the Ortiva product separately as well.
The transaction is expected to close during the second quarter of 2012. Allot said that Ortiva will contribute between US$3 million and $5 million in revenues in the second half of 2012, with a gross margin that is similar to Allot's current level.
Separately, Allot also reported first-quarter results on Tuesday. On a GAAP basis, the Israel-based company posted a first-quarter net profit of $3.2 million, or $0.10 cents per basic and diluted share, on revenue of $24.2 million. (See Allot Records $3.2M Profit in Q1.)
Why this matters
Allot has made its move into video optimization at a time when DPI, or policy enforcement, specialists are looking to expand into other areas of Service Provider Information Technology (SPIT) as they face increasing competition from larger equipment suppliers that are moving in on the policy server market, such as Alcatel-Lucent (NYSE: ALU), Ericsson AB (Nasdaq: ERIC), Nokia Networks and Huawei Technologies Co. Ltd. (See Policy Specialists Squeezed by Vendor Giants, Policy & DPI: $1B Spree, But No Picnic for Vendors and Component Vendors Hit Policy Target.)
According to Heavy Reading Chief Analyst Graham Finnie, Allot's deal makes good sense.
"Ortiva isn't the best known optimization company, but it gives Allot some IPR [intellectual property rights] in an area that's rapidly coming together with DPI," he said. "Allot will want to be able to provide a complete solution, especially in the area of policy enforcement where optimization is beginning to become part of the solution."
Finnie added that Allot's deal could signal more M&A moves among policy vendors.
"Most other DPI vendors, including the big vendors, have tended to work so far through partnerships, but it wouldn’t be too surprising to see further consolidation -- for instance, Procera might be tempted to move in this direction too, since it is looking for acquisitions," he said. (See Procera Builds M&A War Chest.)
"It’s also worth noting that some others are moving in the other direction -- for example, [video optimization specialist] Bytemobile now has DPI capabilities," he added.
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— Michelle Donegan, European Editor, Light Reading Mobile