GENBAND Acquisition of NextPoint Future Proofs Media Gateways and Advances Mobile Data Strategy

| Sep 17, 2008 | IP Services Infrastructure | Competitive Intelligence Report

| Analyst: Joe McGarvey

Current Perspective: Positive/Neutral
Vendor Importance: Moderate/High
Market Impact: Moderate

Event Summary

September 16, 2008 –- GENBAND announced the acquisition of SBC and security gateway maker NextPoint. Details of the transaction, including price, were not disclosed. The move is designed to push GENBAND deeper into the developing mobile IP data market and to add a layer of security and session management capabilities to the company’s media gateway products. GENBAND officials estimated that approximately 160 of NextPoint’s employees would join GENBAND.

Analytical Summary

• Current Perspective: Slightly positive on GENBAND’s acquisition of NextPoint, as the addition of security and session management technology to GENBAND’s primarily media gateway-centric product portfolio will have both immediate and long-term benefits to the company. In the short-term, GENBAND acquires the second-best selling SBC platform in the industry, as well as promising security gateway technology – both of which will add to GENBAND’s top line revenue. Looking ahead, GENBAND will be able to leverage the NextPoint security and session management expertise to fortify its market-leading collection of media gateways with strategically vital technology, which will only increase in importance as end devices for accessing mobile networks becoming IP data aware. As with any acquisition, success depends largely on execution – and GENBAND must demonstrate that it can successful integrate another company and two product classes into its overall portfolio.

• Vendor Importance: Moderate to high to GENBAND and very high to NextPoint, which is being folded into a larger private company within a year of its own major corporate upheaval – the merger of NexTone and Reef Point to create NextPoint. From the GENBAND perspective, the NextPoint acquisition is the company’s fourth major purchase in the past two years, but the first that did not include a media gateway component. This transaction, accordingly, is as much about future integration and development of its flagship media gateway product line as it is about broadening its product portfolio. In terms of long-term implications, the NextPoint acquisition is GENBAND’s most strategically important to date.

• Market Impact: Moderate on both the media gateway and SBC/security gateway markets, as the combining of assets by the two companies will not have an immediate or major impact on the competitive landscape. Though GENBAND’s distribution channels represent a potential new conduit to top tier carriers for NextPoint’s SBC, it will not be enough for NextPoint to make a serious run on the market dominance of SBC leader Acme Packet. On the media gateway front, GENBAND now has the resources to add session management and security functionality to its media gateway, matching the capabilities of rivals such as Sonus, Veraz, and AudioCodes, which also hold media gateway and SBC assets.

Recommended Competitor Actions

• Though GENBAND has a history of absorbing acquisitions, with each new product and technology it acquires it adds to the complexity and cost associated with developing and managing multiple products that were derived from different development teams. With NextPoint, GENBAND, it could be argued, is taking on the burden of managing two additional platforms.

• GENBAND’s decision to focus the press release announcing the acquisition of NextPoint on the potential integration of security and session management into the media gateway products was perplexing, as it is unlikely that the company will reap financial rewards from the integration of these products before 2010. Instead, GENBAND should have focused on the immediate benefits of the acquisition and the potential of the company to expand its presence in the core of mobile networks.

• While NextPoint is the sold number two player in the SBC market – but still significantly behind market leader Acme Packet – it is not likely that GENBAND will be able to revitalize sales of NextPoint’s standalone SBCs. Though GENBAND may get some traction from leveraging its existing relationships with major telecommunications equipment providers, such as Alcatel-Lucent, NSN and Nortel, most of these companies already have relationships with Acme Packet and are not likely to add another third-party SBC to their product offerings.

• Though some analysts characterized the slowdown as temporary, the standalone SBC market declined significantly in Q2 2008. In addition to a pause in some VoIP deployments, the slowdown could be a sign that operators are looking for integrated session management solutions, such as those contained in routers and media gateways. While GENBAND could eventually benefit from this sort of transition, its sales of standalone products would be harmed in the immediate future.

• The acquisition raises questions about the future of NextPoint’s IBG product. If the product’s functionality will be eventually migrated into GENBAND’s media gateways, will GENBAND continue on its present course to house the IBG on an ATCA-based platform. It’s not clear if the IBG’s development roadmap has been significantly altered due to the acquisition and future integration plans.

Recommended End User Actions

• Operators that are currently deploying GENBAND media gateways should request a roadmap from GENBAND related to the company’s plan to integrate security gateway and SBC capabilities into its media gateway products. These operators should also inquire about upgrade opportunities and procedures.

• NextPoint’s existing customers, both on the SBC and security gateway side, should seek immediate reassurances from GENBAND that the company will continue to support standalone products into the foreseeable future. These same operators should examine and evaluate GENBAND’s support strategy and plans before purchasing any additional SBC or security gateway equipment.

• All operators need to adopt a long terms SBC strategy for the core and access points into its network. Operators need to evaluate opposing long-term proposals from standalone SBC makers, media gateway vendors and router makers to see which supplier offers the most cost-efficient approach to session management.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

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