Acme Packet’s Acquisition of Covergence Will Help Solidify Its Role in Enterprise SBC Market

| May 1, 2009 | Enterprise Communications | Competitive Intelligence Report

| Analyst: Brian Riggs

Event Summary

April 30, 2009 -– Acme Packet announced it has acquired privately held Covergence for stock and cash totaling approximately $22.8 million dollars. Covergence, based in Maynard, Massachusetts, is a provider of software-based session border controller (SBCs) for VoIP/IP telephony, unified communications and service-oriented architecture for global 1000 enterprises. With the acquisition, Acme Packet can now target SIP trunking applications for enterprises and small businesses. The core Convergence team along with three executives will be relocated to the Acme Packet’s headquarters in Burlington, Mass.

Analytical Summary

• Current Perspective: Slightly positive on Acme Packet’s acquisition of SBC software developer Convergence because the move will help Acme Packet build out a much more complete portfolio of session border control solutions for enterprises and contact center operators. However, the two companies’ combined base of enterprise customers remains comparatively small and it is likely to take quite some time to make SBC solutions more mainstream technology among enterprises.

• Vendor Importance: Moderate to high to Acme Packet because the acquisition of Covergence lets it quickly deliver a broad set of enterprise solutions in a much faster timeframe compared to internally developing similar products.

• Market Impact: Moderate on the enterprise communications market because Acme Packet will be able to leverage its financial stability and broader solution set to more aggressively market SBC solutions to enterprise accounts. Acme Packet competitors will find the company a more formidable rival when it comes to enterprise accounts, while Acme Packet and Covergence partners may need to reexamine their business relationships with the combined company.

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Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

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Recommended Competitor Actions

• Avaya should attempt to maintain a working relationship with Acme Packet. After all, Avaya did not kick Covergence out of the DevConnect program, but rather it was Covergence that pulled out as it became clear Avaya was developing a competing solution. It is to Avaya’s advantage to involve as many partners as possible in the development of communications solutions compatible with Aura.

• Cisco and Juniper should carefully monitor changes to Acme Packet’s lineup of enterprise solutions, as well as watch for near-term changes to its sales and marketing strategy. The company remains a much smaller rival in the market for SMB solutions for enterprises, but its tight focus on this market segment will provide it with distinct advantages in terms of quick response to market changes and customer requirements.

• Competitors such as Cisco, Ericsson/Redback and Juniper, which are integrating SBC functionality into their routing equipment, will argue that architecturally this is the more desirable approach, and that SBC functions will inevitably be absorbed into routers in the same way that firewalls and NAT have. Router makers will position standalone SBCs as appliances designed for the smaller locations that will not be able to scale to meet future requirements of service providers and enterprises.

Recommended User Actions

• Large enterprise and contact center operators should explore the use of session border control solutions as a means of reducing operational costs of their complex communications networks. SBCs are being actively deployed in new and innovative network architectures, delivering on ROI promises long promised but often undelivered by traditional communications network technology.

• Covergence customers and channel partners should immediately approach Acme Packet for reassurances that the products they have invested in will continue to be developed on an ongoing basis.

• Acme Packet resellers targeting the enterprise should make getting certifications in Covergence products a priority.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

| Client access - Full report in Enterprise Communications | More information

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