Friday, September 17, 2004

Daiwa EuroTelcoblog No. 78: Friday 17th September, 2004 - One piece at a time

This week has seen some interesting M&A developments in and around the IP voice space, suggesting that we're about to see a cascade of small acquisitions of players possessing key ingredients in assembling the killer IP communications platform:
  • First, on Monday we saw Cisco acquire Dynamicsoft, a specialist in presence applications in the wireless environment (and the secret sauce in Sprint's push-to-talk solution), for $55m in cash.
  • Yesterday brought the news from that Skype has added a senior Cisco executive to its board, a development which some have interpreted as being related to the firewall traversal capability which is such an impressive differentiator for Skype. Cisco has clarified that the company itself has no involvement or investment, however.
  • This morning Bloomberg reported that the CEO of Tandberg, which acquired Ridgeway Systems of the UK in June for $16m cash, is on the search for up to four additional bolt-on acquisitions of a similar size. Ridgeway was brought in for its expertise in firewall traversal for SIP applications, which Tandberg will integrate in their desktop conferencing platform, but today's Bloomberg article identifies Tandberg's new interests as lying in the advanced wireless networking and streaming technology arenas.
  • Also this morning, Alcatel announced the acquisition of eDial, also a specialist in SIP-based presence, conferencing and collaboration, for $27m in cash and shares.

This activity highlights two messages we've been sharing with frustrated investors for some time: 1) VoIP is going to be a pervasive part of all sorts of services and devices that we don't immediately associate with "telephony" as such (one reader recently wrote in to propose that ultimately VoIP will not be a service at all, but rather a product); and 2) a lot of the most interesting innovation has been in the hands of small, mainly unlisted companies, in possession of a strategic solution which is cheaper to buy than to build. Our Norwegian friends Paradial, who have a very impressive SIP firewall traversal solution, recently launched a public SIP service (, and are one good example of the sort of European company whose phone may be ringing. eStara ( is another impressive company with a lot of high-caliber customers, which might have a heightened appeal in this climate. It is also interesting to see the listed US company (market cap $92m) Xten Networks up 13% in the past week (outperforming NASDAQ by 6%).

Indeed there are so many "IP enablers" out there with something unique to offer, we think the M&A gurus, VCs and lawyers are going to be increasingly busy as the mainstream wakes up to what is happening and tries to stake a claim in it.

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