Monday, November 7, 2005

Is NexTone the Next One?

I came across this play on words by chance - the copywriter in me couldn't resist using it for this posting. I think it fits pretty well.

NexTone announced its D series round of funding today. They got $35 million, just about doubling their funding to date. So, they've attracted almost $70 million, which is pretty good for a company very few people were following a year ago. Of course, other IP vendors continue to get funding, and it's a sign of health, as many vendors who've been in the game a few years have now got a mature, well defined offering, a sizable customer base, and a core management team with a plan.

NexTone has come a long way, and with over 300 customers, they see a lot of upside for themselves as a standalone vendor in the session border controller space. I've followed this space for some time, and there is room still for vendors with varying approaches to session management, and NexTone has found a strong niche, largely among Tier 2/3 service providers. The Tier 1s get all the headlines, but there's a big world out there for other carriers, and vendors like NexTone are doing a great job catering to their needs.

I don't see NexTone being the Next One in terms of the next Cisco, but I think they are a model for where startup vendors go from here, as they mature from being gawky teenagers into responsible adults - so to speak. The nextgen infrastructure space is full of vendors like this, and they will all face similar decision points in the next year or so.

To me, there are 3 paths to follow - go public, become acquired, or become a consolidator. We've already seen examples for all of these. Within NexTone's space - session border control - Newport Networks had a successful IPO, and both Kagoor and Jasomi were recent exits, being acquired by Juniper and Ditech respectively. Others like Tekelec and Excel Switching have been acting like consolidators given their acquisitions over the past year. It's too early too tell, but if I had to pick, I'd say NexTone is most likely to become a consolidator. Time will tell.

1 comment:

ipcom said...

Posted by: Roy

Hi John. I'm an Investment Advisor and have positions in ACME. I've been reading stuff on SBC's but can't discern whether ACME has a leg up on the other providers in general. Some information leads me to believe that SBCs might be supplanted by other technongy and they might be old hat. VOIP, it seems, has not taken off as planned and what will that do to the SBC market? Anyway, I thought if I could get an opinion by typing a message then I might as well go for it.