Packet inspection/traffic management

Tektronix Helps Fund CloudShield

CloudShield Technologies Inc. has scored another round of financing and a new strategic partner.

The company, which makes deep packet inspection (DPI) products, raised $15 million in a strategic funding round led by diagnostic vendor Tektronix Inc. . Previous investors, ComVentures , TPG Ventures , Foundation Capital , and Paladin Capital Group , also participated in the financing.

This round of financing, CloudShield's fourth, brings the company's total venture funding to less than $70 million. Bill Scull, CloudShield's VP of marketing, says this round will make the company fully funded, and it expects to be cashflow positive within the next year. (See CloudShield Scores $10M and CloudShield Raises $20M .)

CloudShield and Tektronix also announced a strategic partnership under which the companies will work to offer a mix of service control and security technology. Scull says the funding and partnership came about after Tektronix decided CloudShield had the best platform on which to build its next-generation service assurance products.

That should be a huge help for CloudShield as it makes a more aggressive push into carrier networks, since about 30 percent of the world's calls run over networks that are monitored by Tektronix equipment.

CloudShield, which was founded in 2000, has seen a significant increase in sales of DPI boxes over the past year. Touting "incredible sales momentum," CloudShield says in its press release that it has already exceeded 2006 revenues in the first half of this year. As a result, Scull says he expects the company to double -- and perhaps triple -- sales year-over-year.

That robust demand comes from an increased willingness on the part of carriers to put controls into networks. While most operators shy away from talking about deploying traffic management tools, DPI vendors have seen a significant uptick in sales over the past 12 to 18 months.

According to Todd Beine, CloudShield's VP of product management, that's because network operators now admit they "need to control problems they see in the network," such as more sophisticated denial-of-service attacks and greater amounts of peer-to-peer traffic passing through.

CloudShield isn't the only DPI vendor seeing growing demand for its products. Sandvine Inc. , for instance, announced sales more than doubled in its second quarter, on increased takeup from telco customers. Meanwhile, Ellacoya Networks Inc. won a major contract at BT Group plc (NYSE: BT; London: BTA). And sources say that Verizon Communications Inc. (NYSE: VZ) is seeking DPI help with an RFP for traffic management products. (See Sandvine Profit Jumps, BT Picks Ellacoya, and Double Down on DPI?)

— Ryan Lawler, Reporter, Light Reading

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