Friday, July 28, 2006

Convedia Acquired - Media Server Consolidation Next?

The VoIP infrastructure space continues to consolidate, with the latest news, which I found a bit surprising. Convedia has been acquired by RadiSys, a company not normally followed in this space, which is the main surprise element for me. RadiSys is leading vendor in embedded technologies, such as ATCA, but I'll stop there, as I don't follow that space very closely. Hat tip to Mark Evans with his late night post yesterday on the news. Good scoop!

In short, Convedia was acquired for $105 million, which sure looks good, considering how Netrake only went for $11 million to AudioCodes as recently as last week, and I commented about that in the context of how the session border controller market was consolidating. Netrake has raised WAY more money that Convedia, but didn't get nearly as much traction, so the math isn't hard to figure out here.

Convedia is a Terry Matthews company, so there must be some happy folks today over at Wesley Clover - his invesment management arm - including his son/EVP, Owen Matthews, who I just did a podcast with.

So, good news all around, and another validation that Canada is producing some real winners in the IP communications space. Congrats to Peter Briscoe and Grant Henderson! I've followed Convedia closely for many years, and have always admired them. Since evolving to become a media server company, they've maintained a singular focus to do nothing but this. That approach has really paid off as they've become the dominant player in this space, and now the payback has come. As it well should.

Just a quick comment on the news itself. The fit between the 2 companies isn't that evident, and it reminds me of Comverse's acquisition of NetCentrex in April. Very different businesses, but the strategy is sound. RadiSys is an embedded play, whereas Convedia is all about a hardware-based, purpose-built box. Where's the fit there? I suspect this has to do with the fact that so much of this space is becoming software based, and there is certainly a market opportunity for media servers here. To date, software-based media servers have not had much success, although SnowShore has continued to evolve this space under the Cantata umbrella. For Convedia, the embedded expertise of RadiSys may well provide a stronger base for them to develop a rich solution to complement their existing hardware-based product family.

Another key element would be the global market reach of RadiSys. Much like the Comverse deal, RadiSys can bring Convedia to a wider base of customers, especially for those looking for a strong IMS story. Also, both companies have a strong focus on Asia - RadiSys has a design center in China, and Convedia has done a great job of securing design wins with the major Asian vendors, which is critical for getting traction in that market.

So, the consolidation story continues. In the media server space, Convedia is gone now, both Excel and SnowShore are part of Cantata, and AudioCodes is itself becoming a consolidator, much like Tekelec. The only other pureplay that comes to mind, really, is IPUnity, and their Mereon product family. I'm sure the Convedia news is very much on their minds today...

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