IP Telephony news wrap-up for Apr 18 – 2006

Comverse Technology has signed a definite agreement to acquire privately held, Paris-based NetCentrex for approximately $164 million in cash. The acquisition was announced a week before Comverse was called out by the Wall Street Journal for issuing multiple stock option grants on dates that corresponded with price dips in the company’s stock. The timing of the potential scandal could impact the acquisition.

Comverse is hoping to develop a strong position in the IMS and FMC market by combining its messaging, content, and billing solutions with NetCentrex’s Class 5 application server. NetCentrex has nearly 50 service provider customers including a major presence in Europe, supplying such providers as AOL Germany, Comunitel, Fastweb, France Telecom, Telefonica Deutschland, and Tiscali.

The merger promised the cash needed by NetCentrex to make a bigger splash in the North American market. However, Comverse has responded to the Wall Street Journal observation seriously with an announcement that it would restate its financial results for the last 6 years including recording material noncash charges for stock based compensation expenses. Further, the company said it would delay its annual report to the SEC due today (without filing for an extension) and expected to become non-compliant with NASDAQ’s listing requirements.

The potential scandal, currently being investigated by internally by a special committee, could reveal up to 8 instances of issuing grants during stock price dips between 1994 and 2001. The Wall Street Journal reported that just the last 2 instances spotlighted by the newspaper were probably not a coincidence since the odds of the pattern occuring were one in six billion. Before the internal investigation, the management involved, including chairman and CEO Kobi Alexander, claimed there were valid reasons behind the pattern.

A preliminary conclusion by the special committee finds that the actual dates of measurement for certain past stock option grants for accounting purposes differed from the recorded grant dates for such awards.

Wall Street Journal
An affiliate of Kohlberg Kravis Roberts (KKR) will buy Singapore-based Flextronics’ software division for approximately $900 million including $600 million in cash. The deal calls for Flextronics to retain a 15% stake in the business. The said proceeds from the acquistion were likely to be used to support its other operations such as design, manufacturing components and logistics.

Flextronics is the largest electronics contract manufacturer. In addition to supplying the VoIP marketplace with protocol stacks and voice processing, the company makes Xbox video game machines, Motorola cell phones, and Dell computers.

KKR’s acquisition follows its 2005 investment in Avago Technologies, the former semiconductor division of Agilent Technologies.

SurfControl has introduced Enterprise Threat Shield (ETS), software that can control the use and duration of a Skype call or remove the application and prevent its installation and use within a LAN. SurfControl claims Skype introduces an unnecessary risk and vulnerability to businesses via worms, viruses, and undetectable file sharing.

Verso offers a similar product for service providers that blocks Skype traffic.

CompUSA is now carrying a hosted VoIP service package targeting SMBs using between 10 and 200 lines. The solution, which can be supported over a single site or multiple sites, is driven by Sylantro’s Synergy platform and Covad’s VoIP service (sold through Bandwidth.com). The system supports 4-digit dialing, auto attendant, voicemail, Microsoft Office integration, and browser based admin. Synergy supports IP phones supplied by Grandstream, Mitel, Thomson, and Vodavi.

CompUSA offers the service package in more than 240 stores in nearly 100 U.S. markets.

The next version of Avaya’s IP Office hybrid SMB phone system will include Legerity’s voice interface including the vendor’s VE880 VoicePort and LE99112 voice control processor (VCP). The VoicePort is a 2-channel FXS phone line interface that implements BORSCHT (battery, overvoltage protection, ringing, supervision, CODEC, hybrid and testing) functionality. The VCP will be used to program and control the CODEC/filter and to provide enhanced call processing capabilities and simultaneous Q.24 DTMF tone detection.

Avaya has sold more than 60,000 IP Office systems.

Westell has introduced TriLink IMS gateway, a broadband gateway that enables seamless roaming between the PSTN and wireless networks when using a dual mode mobile/Wi Fi phone.

The gateway features a built in ADSL2+ modem and router, a dedicated Ethernet WAN uplink port, 2 SIP access ports with PSTN failover, a 802.11g access point, a 4-port Ethernet switch, and TR-069 based remote device management.

The gateway is currently available. The news release did not mention the gateway’s interoperability with any specific vendor’s dual mode IP phone.

Yahoo! has launched Messenger with Voice in the U.S. The new PC to X service, embedded into its instant messaging platform, employs Global IP Sound’s VoiceEngine. PC to phone calls are billed at 2 cents a minute for U.S. calling and calling to 29 other countries. IM users connected in the U.S. can opt to receive calls on their PC from the PSTN or mobile phones for a flat fee of $2.99 per month or $29.90 a year. The Phone In service provides users with a virtual phone number based anywhere in the U.S., the UK or France. The service also includes free voicemail.

Currently, Messenger with Voice is available in 8 localized versions including France, Germany, Hong Kong, Italy, Singapore, Spain, and the U.S.

Messenger with Voice
Messenger International Calling Rates
Covad Communications has reported the deployment of more than 580 vPBX and PBXi Plus Cisco based IP PBX systems in the U.S. in 2005. The networks use Cisco’s routers, switches, IADs, and IP phones.

Covad has also expanded its partnership with EarthLink, providing the ISP with wholesale voice services in Atlanta, Chicago, L.A., Miami, N.Y., Philadelphia, San Diego and Washington D.C. The service expansion was based on a deal that called for EarthLink to provide Covad with $50 million in debt and equity financing. In exchange for the financing, EarthLink will be receiving $10 million in common stock and $40 million in convertible debt due in 2011.

Covad Communications
Cisco Systems
ABI Research has released Fixed Mobile Convergence: Comparative Business Plans, Implementation Scenarios and Capital Expenditure, a study that provides an overview of FMC-enabled networks and evaluates business case scenarioes and vendor strategies. The report also provides forecasts through 2010 including subscriber numbers, ARPU, service revenue and capital expenditure.

ABI has not disclosed much of its findings, other than forecasting at least a tenfold increase in enterprise FMC subscribers and revenues over the next 4 years.

ABI Research

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