Packet inspection/traffic management

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

digits 12/5/2012 | 5:35:27 PM
re: Procera Builds M&A War Chest

I think we can expect to see a great deal of consolidation between the DPI/PCEF, PCRF, charging/rating, optimization and analytics specialists in the next few years.

Maybe Allot and Procera will be the catalysts....


DCITDave 12/5/2012 | 5:35:03 PM
re: Procera Builds M&A War Chest

Genband might be a buyer in this space as well. It might even go after Procera at some point.

Here's my theory: Genband licenses some of Procera's source code to build DPI functions into its devices, so Genband is familiar with the space and Procera specifically. Procera sales to Genband netted the company $1.5M in revenues in 2010 and $900K in revenues last year.

Also, Genband's restructuring of late puts Mark Purgerude, a Procera board member, in a very visible spot as the head of marketing and sales. Genband obviously is on the hunt for newer sources of revenue not tied to its legacy switch businesses and policy management is still seen as an area where there's lots of growth to be had.

Anyway, just a theory.

redbull187 12/5/2012 | 5:34:12 PM
re: Procera Builds M&A War Chest

Phil you must have some kickbacks from GenBand. GB is a company without a "soul" . Unless your on your death bed why on earth would you want to be acquired by GenBand ?

redbull187 12/5/2012 | 5:34:12 PM
re: Procera Builds M&A War Chest

GenBand sucks- a turkish low life company. Have they actually developed a product ?

DCITDave 12/5/2012 | 5:34:10 PM
re: Procera Builds M&A War Chest

That's a stupid theory.

Explain how these kickbacks would work exactly. I suggest that Genband might acquire a company that it has a business relationship with, knows its products, needs its products, and is a likely target for anyone in the DPI space. And then what? What do I get out of the deal? Weird that you'd accuse me of something that doesn't necessarily benefit me and comes from the idea that Genband's business is maybe not as great as the company keeps telling us.

acohn 12/5/2012 | 5:34:10 PM
re: Procera Builds M&A War Chest

I'm guessing he is one of the recently terminated employees from GENBAND. No job + disgruntled = lots of free time to trash talk your ex-employer on the internet. 

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