GENBAND’s Acquisition of Cedar Point Boosts Company’s Stake in Cable Market

Event Summary

January 4, 2011 – GENBAND announced the signing of a definitive agreement to acquire Cedar Point Communications, a telephony and multimedia equipment maker targeting cable operators. The transaction, which is expected to be completed sometime in January 2011, extends GENBAND’s installed base in the cable market by roughly 7.5 million subscriber lines and includes several prominent cable operators in North America and Europe. Neither company disclosed the value of the transaction.

Quick Take

Analytical Summary

• Current Perspective: Positive on GENBAND’s plans to acquire Cedar Point Communications, as the transaction will extend GENBAND’s reach into the cable market and is consistent with the company’s strategic business plan to assemble a comprehensive IP transformation portfolio that is applicable to a large cross-section of operators. In addition, the transaction is also aligned with GENBAND’s strategy to provide operators with a gradual and incremental migration to IMS. The proposed transaction poses a risk in that future revenue generated by the Cedar Point assets may not cover the cost of the acquisition or cost associated with integration of the acquired hardware/software into GENBAND’s already eclectic portfolio.

• Vendor Importance: Moderate to GENBAND as the acquisition is based on the same strategic principals as previous acquisitions, including the much larger 2010 acquisition of Nortel’s CVAS business unit. The Cedar Point acquisition, however, holds a potentially high strategic value for GENBAND in that it provides the company with what is essentially a cable-specific VoIP offering. Though Cedar Point’s share of the overall cable VoIP space is currently smaller than GENBAND’s, the acquisition creates the opportunity for GENBAND to breathe new life into Cedar Point’s solution by improving the company’s financial footing and augmenting the technology with GENBAND’s considerable services resources and product portfolio.

• Market Impact: Moderate on the overall fixed softswitch and IMS segments of the market, as Cedar Point’s standing in the cable market has lessened to a degree over the past few years. In addition, the company, despite efforts to make an impact in the lower-tier segments of the telecommunications market, has never posed a significant competitive threat outside of the cable market. However, all competitors looking to capture market share among MSOs need to carefully monitor the GENBAND acquisition. Though it is too early to evaluate the impact that an ownership change will have on Cedar Point’s competitive positioning in the cable market, GENBAND’s acquisition has the potential to make MSOs re-evaluate Cedar Point’s long-term role in the further migration of their networks to IP.

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