BCE Deal - How Do You Value a Telco?

The BCE privatization saga continues, and now the ball is back in BCE's court as they try to defend their valuation and trump KPMG's solvency opinion. There's a lot at stake here, and both sides are pulling out all the stops to get things to go their way. It's a bit like watching Detroit's auto execs going hat in hand to Washington for a bailout. If the deal falls apart, there are big time winners and losers, and a whole new environment for Canadian service providers.

I'm not following the minutiae of the story, but you can get a good taste of it here. It's high stakes accounting, banking and legalese, with lots of complexities around things like the criteria for determining solvency, the benchmark dates for making valuations, potential conflicts of interest for KPMG between BCE and the bankers, avoidance of paying break fees if the solvency test is the deal-killer, the impact of Canada's suddenly weak dollar, etc.

There are many angles and sub-stories here, and some will only be of local interest. In some ways BCE is better off remaining a public company, and long-standing shareholders will be happy because the huge drop in valuation this week only remains a paper loss. By staying public, BCE avoids taking on the $30+ billion in debt, which would severely restrict its ability to invest in network upgrades to remain competitive. If the deal dies, all bets are off, and BCE's competitors will have to expect a more aggressive posture from them. That in turn should keep the playing field a bit more level since BCE will be jumping back into the pool with both feet.

Not everyone out there will find the BCE story of interest, and that's fine. My main reason for posting about this is to draw attention to the challenges of valuing a telco, especially in tough economic times. I'm not an expert in business valuations, but it sure must be difficult to assess the value of the two primary assets of any telco - its subscribers and the network. BCE is a great case study since it's so public, and if I was a telco, I'd be watching this one closely. I wouldn't be at all surprised to see one or two major telcos/cablecos to falter in 2009, and they'll have the same issues to deal with. In today's world of IP communications it's much harder to place a value on the subscriber, and at some point, revenues from advertisers will be part of the mix, just like they are with the portal players like Google and Yahoo. I'm sure BCE will be a real test to determine just how well auditors can do their job in valuing service providers, and I guess we'll know once the final rulings are decided. Stay tuned.


Technorati tags: KPMG, Jon Arnold, BCE

Signs of Life - SightSpeed, iSkoot, Intelepeer, BCE

Busy, busy - no time for a thoughtful post, but a quick one will do. With so much bad news out there - and more coming no doubt - it's good to remember that good things are happening too.

I've got my hands full with work right now, but wanted to make sure you knew that it's not all gloom and doom. In no particular order, these should give you cause for hope. It's Remembrance Day/Veterans Day, after all, so a pause to appreciate the positives is not such a bad idea.

Intelepeer - today announced a raise of $18 million.

iSkoot - a few days back, they raised $19 million.

SightSpeed - long a favorite of mine - was acquired about 2 weeks ago by Logitech for $30 million.

BCE - up here in Canada, despite difficult capital markets, it looks like the financing needed for their privatization deal is falling into place.



Technorati tags: Intelepeer, Jon Arnold, iSkoot, BCE, SightSpeed

Videoconferencing News - GIPS and SightSpeed

Two companies I have some history with in the videoconferencing space had some news yesterday - GIPS and SightSpeed. I was set to post this yesterday, but we had a power outage at an inopportune time. After that, one thing led to another, and it just didn't happen as intended. Defeated by technology, again...

I'll start with GIPS - Global IP Solutions - since I have more history there. They've just published a white paper along with a video to demonstrate how far desktop videoconferencing solutions have come. I won't say any more than that since I'm the author of the white paper, and I'm not in the PR business. However, I am pleased to see how much attention this has been getting, so if you haven't come across this yet, you can find it in a few places - Fierce VoIP, Conferencing News, and an in-depth review/analysis from Jim Courtney on Skype Journal.

For more detail, you can read the press release here, and download the paper as well as view the demo video here.

SightSpeed had some very exciting news of their own on the same day, so there must be a trend happening. In short, they were acquired by Logitech for $30 million.

Aside from being a great exit for Peter Csathy's company (his third), I see this as nice validation for the good work GIPS is doing. I've got some nice history with SightSpeed as well - and have been a happy user - so it's personally satisfying to see a company I've been following for a while get a buyout like this, especially in such a difficult economy.

Finally, to tie things up nicely, colleague Alec Saunders featured both companies on yesterday's Squawk Box podcast. Guess I'm not the only one seeing a trend here!

Technorati tags: GIPS, Jon Arnold, SightSpeed, videoconferencing

Loose Ends - Skype and the Great Firewall of China, VON/Virgo Deal, Oz/Nokia Deal

I don't get paid to blog, so when I'm busy with consulting work, I fall behind on the news. There is always interesting stuff going on, and before the week is out, I wanted to quickly draw attention to three stories of note. These are all of interest to me, but it's way too late to post about them. So, for the laggards out there, here are three items you might want to explore further.

1. Skype - China/censorship/privacy - you get the idea. Wow, this is an interesting - but not altogether unsurprising story. Barely a month after the Beijing Olympics, here we go again, with the dark side of state-run media rearing its ugly head.

You don't have to look far for coverage of this story, or think too hard about how insidious all this is, but it's another reminder of how the Internet is impacting our lives. Ultimately, it may be a borderless technology, but as they say, the "great firewall of China" isn't quite onside yet.

I'd start first with Phil Wolff's posting on Skype Journal, then Om Malik, and I'm sure you'll find many others from there. I should also add this is not a new problem, and Skype is not alone in this morass - other IM platforms have had similar issues. RIM too, by the way.

Aside from the coverage you've already seen on this, I wanted to add some local coverage that I thought was really great. It ran in today's Globe & Mail, and talks about how a lab researcher here at the University of Toronto - Nart Villeneuve - uncovered some online trails that led him to all kinds of censorship and monitoring in China with Skype traffic. It's a great read, and am pretty sure will add valuable first-hand insight for anyone following this story. I should add that local colleague Jim Courtney - a regular Skype Journal contributor - picked up on this today, as have others like Om Malik.

I'll end on that triumphant note, as it's great to see some homegrown investigative work getting to the bottom of a truly international issue.

2. Virgo acquires VON. This is a much smaller scale story, but still of interest to many of us in the space. Several of us got wind of this news at the IT Expo a few weeks back, but it's just becoming official now. Andy Abramson had a good wrap on this the other day, and there's not a whole lot more to say about it right now.

Well, there is, but it's end of the week, and I'm kind of done now. That said, I wanted to at least acknowledge the story because it's evident from my recent conversations that most people don't know this has happened. Now you do.

3. Nokia acquires Oz Communications. Yet an even smaller story, but also of interest to me. Everyone knows Nokia and how they're doing lots of cool things with Ovi and just launched their iPhone killer. But most of you don't know Oz - a bit like saying you don't know Jack.

I've followed them for a while, and it's another great Canadian success story. So, add a notch for our win column, which is a nice way to end the week as the weather gets colder and my Red Sox look to keep winning.




Technorati tags: Skype, Jon Arnold, Nart Villeneuve, VON, Oz Communications

BroadSoft Acquires VocalData

Interesting story from yesterday about BroadSoft acquiring what used to be known as VocalData. It's not huge news and hasn't received much attention, but for people like me who have followed these companies pretty much from the beginning, we notice.

You can tell I'm old school because I talk about VocalData. The more current explanation - which you can see in the press release - is that BroadSoft acquired "GENBAND's M6 Communication Applications Server" - formerly known as VocalData.

Genband - formerly General Bandwidth - is a story unto itself with a history of acquiring and divesting, and VocalData came along with their last big deal. I've never been able to figure out how all their moves really add up - and I'm not alone - but it's pretty clear they're steering now more towards the media gateway space and away from the applications space. Fair enough - it's very hard to be really good at both.

I haven't heard anything yet about how much the deal was worth, but I honestly can't imagine it was a lot, and very likely under $10 million. The important thing is that BroadSoft is consolidating what little is left among pureplay application server vendors. There was a time when the U.S. market had 3 major players - BroadSoft, Sylantro and VocalData, and I tracked them all when I covered this space at Frost & Sullivan. I always liked VocalData, but they couldn't keep pace, and in time, this became a two horse race.

I've long been friendly with both Sylantro and BroadSoft - and have attended their customer events - but most people would tell you that BroadSoft is the stronger player these days, and continues to innovate on many fronts. Adding VocalData pushes up their revenues and customer base - which the press release says now stands at 435. That's a pretty nice book of business, and I have a pretty good feeling that you'll be hearing about bigger and better deals from them before the year is out.

Before moving on, I should clarify that BroadSoft may be the #1 app server vendor for North America, but globally, Comverse/NetCentrex is bigger, mainly by virtue of some very large residential VoIP deployments in Europe.

Technorati tags: BroadSoft, Genband, Jon Arnold, VocalData, application servers

Nortel Acquires DiamondWare

Got another acquisition story to tell you about, and one that I'm really glad to share on a few fronts. This morning, Nortel announced its acquisition of DiamondWare, one of those really cool, stealth-type companies most people have never heard about. Most - but not all. They were nice enough to cite me in the press release, and it probably helped that I'm one of those few people who have heard about DiamondWare.

This story has been a long time in the making, and I'm pretty certain that I'm the only industry analyst who has had direct exposure to both DiamondWare and Nortel's web.alive collaboration initiative. I'm not going to rehash the details, but you can read more about DiamondWare in my post from early last year, and Web.Alive in my post from May summarizing the highlights of an analyst/media day that Nortel hosted in Ottawa.

If you read these posts, you'll see that based on my experiences with both companies why this deal makes so much sense. It's great validation for DiamondWare, who cut its teeth on leading edge work for the US military, some of which has found commercial use in Second Life as well as most of the major gaming platforms. In my mind, if you can master these environments, enterprise applications should be relatively easy.

For Nortel, this is very nice evidence of the "new Nortel", and is the kind of acquisition that can return them to the forefront of innovation. In financial terms, it's a small deal - $7 million cash and up to $3 million for performance - but in technology value, it's much bigger. The traditional voice business is tough going for anyone battling Cisco, Avaya, etc. head-on, where margins are getting smaller and the number of competitors keeps growing. With web.alive and Project Chainsaw, Nortel is pushing the boundaries and by locking up great technology like DiamondWare, I think they've got a prime opportunity to define Communications 3.0 for the business market.

I'd say chalk one up in the win column for Nortel, and congrats to Keith Weiner and the DiamondWare team who have labored obscurely out in the desert - literally - Arizona - and now have a place to really shine.

As a footnote, to learn more about Project Chainsaw, you should check out their blog, which officially launched today.

On a personal note, I'd like to close by saying it's been a good week for acquisitions I've had some connection to. In addition to this story, on Tuesday I posted about another company I was involved with looking for an exit - Micromethod, who was just acquired by Voxeo. Not sure who's next, but when things happen, I'll be sure to let you know.


Technorati tags: Nortel, DiamondWare, Jon Arnold, Project Chainsaw, collaboration, web.alive

Micromethod Acquired by Voxeo

Got some nice news to share about a former client that hit the wires this morning. Micromethod Technologies is a tiny company most of you have never heard about, and they've been quietly doing some leading edge work in the SIP server space.

Today, at their big industry event - SpeechTEK - Voxeo announced the acquisition of Micromethod. The news was a key highlight from their event today, and colleague Dan York provided a more detailed take on the Voxeo blog.

Last year, Micromethod engaged me to help find a buyer, and Voxeo was one of several companies we entered into discussions with. During this time I got to know Voxeo, and have since become a fan. Without getting into the details, it's a great fit for both companies. Micromethod gets exposure to a large customer base to put their applications/platform to work, and Voxeo gets some entry points into Asia as well as a tightly-knit developer team in China.

This deal came to fruition after my time with Micromethod, but I'm still very glad to see them get an exit and a home to keep their technology evolving. It's a good news story all around, and some nice validation that small startups can do well for themselves if they stick to their vision and hone in on the right targets.

Since we all have to make a living, I'll just leave you with this thought - if you're in a similar situation as Micromethod and need the benefit of a third party in this space, drop me a line. Similarly, if you're in Voxeo's shoes, and are looking for emerging companies with promising technology, I can probably be of help.


Technorati tags: Micromethod, Voxeo, Jon Arnold, SIP server, Dan York

Espial Acquires Kasenna

Here's a noteworthy item that came out on Canada Day. In short, one IPTV middleware company has acquired another IPTV middleware company. It's not a huge story or a huge deal, but still of interest to anyone following this space.

The players involved are Ottawa-based Espial Group and California-based Kassena. It's a very small deal dollar-wise - not even $10 million - but there are a few aspects worth commenting on.

First, it's a Canadian story. I've followed Espial for quite some time, and they went public up here on the TSX a little over a year ago.

Second, you don't often see Canadian companies acquiring U.S. companies in the IP world. Mitel's acquisition of Inter-Tel last year was another example, but on a much larger scale. Aside from not often seeing these kinds of deals, you may well not have heard about it either. In addition to this being a really small deal, the timing is a bit odd. Falling on Canada Day, it didn't really get picked up until today. And coming into the July 4 break, it may not register much in the U.S. this week either. Is it possible the timing was intentional so as not to attract much attention? I'm not close enough to either company to speculate, but I welcome your thoughts.

More importantly, the story is worth noting as a sign of low-level consolidation in the IPTV market, which is taking longer to hit its stride than most of us have expected. This is a natural stage for any emerging sector, and together these companies should be stronger. It's always tough to gauge synergies among like companies, especially when they are of comparable size.

The real problem here is that the IPTV space - especially middleware - remains fragmented, with no dominant player. Well, they're all competing against Microsoft - that's a given - but otherwise, they're all pretty small. As a result, the longer the market takes to mature, the harder it is for the indies to hang in for the payoff. At this stage of the game, revenues are hard to come by, and options for toughing it out another quarter or two are limited. That would explain why the size of this deal is so small. Better to take a small buy-out now than risk getting nothing later on.

I've always liked Espial, and hope this deal takes them to another level. If it does, I'm sure we'll see other roll-ups as the other middleware vendors look for ways to keep pace. I doubt this will be a game-changer for Microsoft, but it sure gives Espial more runway now to ramp up and try to emerge as a leader among the indies.

All I can do here is draw some home-grown attention to the news and hope they can make this work. Go Canada!


Technorati tags: Espial, Jon Arnold, Kasenna, IPTV

Geosign - what a story!/Welcome Kevin Restivo

This is a two-for-one post. First item is Geosign, a very mysterious company based in Guelph, Ontario. I posted about them last March after they quietly received a humongous funding of $160 million. This kind of money is unheard of in Canada, especially for an obscure company in an obscure town. In the IP communications space, most ventures are lucky to scare up a few million, and this raise is probably more than the whole space has received combined. I've never seen anything so out of whack at this level of magnitude. It just didn't add up.

After hearing about the funding, I approached them for me to come out and do an interview with their CEO. Initially, they were receptive, but suddenly the trail went cold - they were no longer giving interviews. Over the course of last summer, I had a dialog going with a journalist who was trying to get the story, and she had all kinds of interesting tidbits that were difficult to substantiate, but you just could tell something wasn't right. We fell out of touch, and Geosign has been off my radar for a while - but I've always wondered what the real story was.

Well, the other day I got my answer. Last weekend, the Financial Post Business Magazine ran a cover story on Geosign, penned by Robert Thompson. It's one of those you-have-to-read-this-to-believe-it stories, and I'm not going rehash it all for you here. I'll just say this was the classic Google pay-per-ad-click model on steriods, with hundreds of bogus websites set up as landing pages with nothing more than online ads on them. The scheme worked well enough for Geosign to attract $160 million - incredible! - but once Google caught on to their M.O., they changed the rules of the game, and the whole thing collapsed practically overnight.

Someone should make a movie of this. Canada is such a nice, modest, polite place, and you'd hardly ever suspect something like this would come out such a wholesome place like Guelph. Incredibly, as you read through the story, no crimes were committed, and the founders have simply moved on to other things - as if nothing ever happened.

I just want to say enough here to tempt you into reading the article. It's a great read, and I don't want to take away from Robert Thompson's good work.

Now for Part 2 of my post. I never would have seen this if it weren't for fellow analyst Kevin Restivo. He actually used to cover tech for the same paper as Robert, the Financial Post here in Toronto. He left a few years back for the analyst world, and is currently at IDC. We see each other at local events, and more recently, he's made me aware of his blog, which was started back in the summer.

While scrolling through his recent posts yesterday, I came across his post about Geosign. That was the first news I'd heard about Geosign in ages, and I'm so glad he referenced the magazine article, as I never see the Post. So, now I have the full story, and am happy to share it here.

More importantly is a shout-out here to Kevin and his blog. It's really good, not just for local and Canadian coverage, but Kevin is a strong analyst, and has keen insights on technology trends in general. We have very few analysts blogging about the Canadian market, and I'm glad he is. We have reciprocated links on our blog rolls, and I'm happy to introduce Kevin to my readers.

Technorati tags: Geosign, Jon Arnold, Kevin Restivo

Posted by jonarnold at March 19, 2008 11:53 AM

Comments

Jon: Thanks for the kind remarks. The story was very well received -- and what a tale it is!

Posted by: Robert Thompson at March 23, 2008 07:31 PM

Phonetime Graduates to Toronto Stock Exchange

Well, here's a good news item I'm pleased to share, especially as North America teeters on the brink of recession.

One of our local companies - Phonetime - has graduated from our venture exchange to our big board, the TSX. The news was announced today, and I say that they've graduated for a good reason - their trading symbol is PHD. Hah - can't get any smarter than that!

This is a really positive sign for a company that doesn't get much attention and operates a pretty simple, Voice 1.0 business. They've been on the venture exchange since 2000, and I've been friendly with them for a few years, so I can say first hand this is a good story.

Phonetime is basically a one-stop-shop for long distance telecom services across Canada. They operate their own national network, and have a healthy mix of both wholesale termination/origination business as well as retail offerings, primarily through calling cards. Sure, it's a low margin/high volume business, but if you establish your network and maintain a reasonably loyal mix of customers and distributors, it can be a decent business.

Not very sexy, but with Toronto's unparalleled mix of cultures and immigrants, this is a great market for these types of products, especially the calling cards. VoIP may not mean much to this audience yet, but calling cards make a lot of sense, especially for people who do not even have the luxury of their own landline.

For sake of transparency, I'm not a shareholder, but it's been on my to-do list for a while. I think I'll follow their progress on the TSX for little bit first and then see about becoming one.


Technorati tags:
Phonetime, Jon Arnold, TSX

New Coverage on Acme Packet and Veraz Networks

Just a quick post to draw your attention to some great coverage on two companies I've been a fan of for a long time - Acme Packet and Veraz Networks.

Colleague Catharine Trebnick has followed our industry for many years, primarily as a financial analyst. She knows it quite well and is currently a Principal at Boston-based investment bank America's Growth Capital.

They recently initiated coverage on these companies, and Catharine's reports have just been published. I've had a chance to review them, and aside from her strong company-based coverage, her reports provide a solid overview of the markets these two pure-play companies compete in. Basically, she's saying that Acme is still a good growth story, and Veraz is on it's way, but is definitely in a tougher environment.

Catharine has been nice enough to share her reports with those who are interested, and I'm nice enough to extend this to my readers. So, if you'd like to follow up, please contact Catharine directly by email, and she can take things from there. And if you do, I'd love to hear your thoughts on her coverage.

P.S. Look for another post in the next few days about something else I'll be doing with her firm...


Technorati tags: Catharine Trebnick, Jon Arnold, America's Growth Capital, Acme Packet, Veraz

Dialogic Acquires Cantata

I got a press release this morning announcing that Dialogic has acquired EAS Group, which in turn owns Cantata. That was news to me, and I haven't seen any commentary out there about this yet. Either people are busy with other things, or it's a non-event. Not sure.

Anyhow, you can read the release for yourself on Dialogic's website, or if you go to Cantata's site, there's a message directing you over to Dialogic's site, or a click-through to the same press release that's running on Dialogic's site. So, I guess it's official.

To be fair, I haven't followed Cantata as closely as I used to, but it's no secret they've had difficulty making their mashup of VoIP infrastructure companies work. Cantata is made up of three Massachusetts-based vendors - SnowShore, Excel Switching and Brooktrout. They've all had up and down rides, and at this point, it's clear that a better plan is needed. Consolidation has been a major trend this year in IP, and Dialogic's move is another step in that direction.

I can't really add much else right and will have to look into this a bit further. At first look, there are some parallels to what Radisys did by acquiring Convedia last year. Media servers are a common aspect to both moves, and this is an important nextgen building block, not just for everyday VoIP, but IMS as well.

Clearly Dialogic thinks there's a fit here, and maybe they're trying to become a consolidator now. That said, no financial details of the deal were provided, and it's not explained how Dialogic is funding the deal. The fact that not much is being said about this raises some questions, so it's hard to draw firm conclusions right now.

Of course, if you didn't know, Dialogic is based in Montreal, so it's worth noting that a Canadian company has come into the milieu and acquired an American company. Hate to say it, but it's probably a good time to be doing this given that the Canadian dollar is trading above the greenback. So, for a change, the economics are attractive for Canadian companies to do this.

Actually, with the US dollar being weak relative to other currencies, I wouldn't be surprised to see vendors from other parts of the world follow Dialogic to take advantage of their stronger currency. Time will tell. Meanwhile, it's Canadian Thanksgiving on Monday, so I'm sure the Dialogic execs will be enjoying their turkey. Gobble gobble.



Technorati tags: Dialogic, Jon Arnold, Cantata

BCE Privatization Story/Meeting Mr. Sabia

Without a doubt, the privatization of Bell Canada/BCE is the biggest story in Canadian telecom, and has many fascinating angles worth exploring. I've been very quiet about it, simply because it's so widely covered, and if I get started on this, I could be blogging for a long time. I gotta make a living, and have a backlog of other posts to get out from being away last week. Please be patient....

Well, I got my chance to speak my mind about BCE today on BNN - Business Network News. This is one of Canada's main financial news TV networks - it used to be called ROB TV (Report on Business TV), and was recently rebranded as BNN. Same studio, same people, same shows, and same owner - the Globe & Mail.

The studios are right downtown here in Toronto, and I was downtown anyway for a meeting, so the timing worked out well. This afternoon, I was on the After Hours show, hosted by Kim Parlee and Andy Bell. They wanted my take on the BCE deal, and what it means to Telus, as well as the rest of the Canadian communications landscape.

The segment runs about 7 minutes, and you can find the link on the BNN home page. You first need to get to the program listings for July 3, and then scroll down to the 4:40 pm time slot, and you'll see the link there.

If you can't find that, here's a direct link. However, they usually only leave these up on the site for a week, so don't wait too long if you want to view it.

So, what's the connection to Mr. Sabia? Michael Sabia is BCE's CEO, and figures prominently in most of the coverage of this story. Well, who do I run into as I'm leaving the studio? Mr. Sabia - he was on his way in to do the next BNN segment. If you want to hear his take on things, here's the link to the SqueezePlay show which follows After Hours. His interview starts at around the 13 minute mark. Strange, huh? Never met him before, and I may never meet him again - at least in his current role. You never know whose path you will cross - I wonder if he saw my segment?


Technorati tags: BCE, Jon Arnold, Business Network News, Telus, Michael Sabia

Shoretel IPO Roadblock - Mitel Launches Lawsuit

I just got back from Mitel's customer/analyst conference this morning, and have not been able to blog until now. I've got a backlog of things to post, but this one has to be first. I got wind of this late yesterday - Las Vegas time - but wasn't able to post about it until now. This may well be the first you've heard about this story.

Basically, Mitel is suing Shoretel big time for patent infringement, and the news hit the wires late yesterday.

In the enterprise telephony vendor space, this is a big one. There's not much detail in the press release - no surprise there - but there's been some difficult history between these companies, and it looks like Mitel has strategically timed this release in advance of Shoretel's planned IPO.

Seems very similar to the tacks a number of service provider threw in the road just around Vonage's ill-fated IPO last year. It's another example of how tough it is to go public these days, and it's too early to know if Shoretel was blindsided here, or just felt these patents would never be an issue. More to come, for sure....




Technorati tags: Mitel, Jon Arnold, Shoretel

Espial Goes Public

Espial is a company I've been following for some time, and they had some great news today. This morning was the official announcement of their IPO on the Toronto exchange - the TSX - and their trading symbol will be ESP. How cool is that for a symbol?!?!

This may well be the first you've heard of the news, as the press release has not been made available yet over the U.S. PR wires. I suspect it will hit the wires first thing Monday, but you're reading about it here today.

In short, as reported in the release, the stock will list at $7.00, and if all goes well, Espial will raise $25 - $30 million, which will go a long way to fuel their growth plans. They have a good story to tell in the IPTV middleware space, which is going through its own consolidation phase. With this IPO, Espial should be in a great spot to emerge as one of the leading independent middleware vendors.

IPOs of Canadian vendors in the IP communications space are pretty hard to come by, and I expect Espial will be well received. So, congrats to Espial, and being Ottawa-based, this is probably the best feel-good story out there, since the Senators went out quietly this week!

If you're interested in Espial, I'll be doing a podcast with them soon about the IPO, and if you can't wait for that, I also did one with them about a year ago.



Technorati tags: Espial, Jon Arnold, IPTV

Mitel Acquires Inter-Tel for $723 Million

This story broke late yesterday, and I just wanted to draw attention to it. Not much public detail or blog coverage yet, but I think it's a good story. This is a $723 million deal, so it's not a small thing, and speaks loudly to Mitel's ambitions about becoming a bigger player in a rapidly growing market.

Mitel has long been a leading IP telephony vendor, especially in the small/mid size end of the enterprise market. Inter-Tel has a strong communications platform, and both companies are leading advocates of SIP and standards-based technologies.

It's another industry consolidation play, and will build two mid-tier players into a big, single mid-tier player who can dominate their space as well as better challenge the top tier vendors. Sounds like a good move for both companies, and it will be interesting to see how they combine their portfolios and manage joint customers.

Another angle to watch is how a private company absorbs a public company, especially with Mitel being Canadian and Inter-Tel being American. Also, Mitel has been on-again/off-again about going public, so this may be one way to address the issue, although my understanding is that Mitel will be remaining private.

For reference, I recently did a podcast with Don Smith, Mitel's CEO. He didn't tip his hand then about these plans, of course, but no doubt talks were underway at that time.



Technorati tags: Mitel, Jon Arnold, Inter-Tel

XConnect Raises $12 Million - Validation for Peering

Very nice press release that went public today, so it's ok to talk about it now. XC Global Networks just got its first major capital raise, and at $12 million, this gives them some space to really move VoIP peering forward. XConnect has been a leading advocate of VoIP peering, a space that is a bit like session border controllers. It's new, not well understood, not clearly defined, and not extensively deployed yet by carriers. There are a number of players taking different approaches to peering, with different models, settlement mechanisms, and solutions.

Anyone following this space would recognize the familiar faces, such as Stealth and Arbinet, and moving further afield, Nominum and Neustar, and on the SBC front, NexTone and Acme Packet. They all have a place in the ecosystem, but I think we're going to see consolidation as the peering space matures into a real market.

With this funding, XC is certainly in a good spot to be a key driver, and stepping back a bit, it's a very good sign of confidence that peering is being seen as a business opportunity. IPOs in the IP communications market have been dicey, and VCs are being selective about their investments, not just because IPOs are no sure thing, but also because it's hard to find good business models in this market.

That said, peering has nowhere to go but up, and no doubt the VCs see parallels in the market Acme Packet is addressing in terms of being at the beginning of the uptrend. On that front, it's a big day for XConnect, and for the health of VoIP peering in general, let's hope there will be more funding announcements to come.

Disclaimer - I am an Advisor to XConnect, so I'm personally happy about this news. However, I've tried to make this post as objective as possible, and hopefully that's how it comes across.


Technorati tags: XConnect, Jon Arnold, VoIP Peering

Will Bell Canada Be Taken Private?

Quite the story in today's Globe & Mail. The Globe reports that LBO heavyweight KKR is in preliminary discussions about taking BCE - Bell Canada Enterprises - the holding company for Bell Canada - private. This is being talked up as a $30 billion deal, which would make it the largest privatization in Canada's history.

A lot would have to happen for this to work, with two of the key issues being foreign ownership restrictions of Canadian telcos, and the large ownership stakes held by pension funds. The details are fascinating, and the article explores these pretty well, so I'm not going repeat things here.

The key thing for me is that Bell has been lagging its peers for far too long, and shareholders must be getting frustrated watching Telus and Roger deliver far better returns. Michael Sabia has been at the helm for a while now, and just can't seem to move fast enough to restore Bell to its pristine image as one of Canada's best companies. Mark Evans speculates further on what this deal may mean for Mr. Sabia in his post today.

With telecom reform looming here, and the Income Trust option now dead, there are many implications in this story for Bell Canada and their options moving forward. They have certainly made some good moves recently to stay focused on their core businesses, but the downside of being so big is the difficulty of moving quickly and responding to changing market conditions. It is not hard to argue that the Canadian telecom market lacks real competition, and this news will certainly highlight the holdback created by limited foreign investment. The pool of domestic alternatives to the incumbents is small, and not getting any bigger. Foreign entries or foreign investment will likely be the only way to change the status quo.

Stranger things have happened. Who would have expected SBC to take over AT&T? My view was that if AT&T could be taken out of the market, than anything was possible. In Canada, this could well be one of those scenarios. If the sentiment from the Globe's reader comments is any indication, then I'd say that many would welcome the change, but along with is a sense of futility that this is yet another sector of our economy that is falling in American hands.



Technorati tags: Bell Canada Enterprises, Jon Arnold, Kohlberg Kravis Roberts, Canadian telecom

Cisco Raises the Stakes with WebEx

The news of Cisco's $3.2 billion purchase of WebEx comes hot on the heels of Microsoft's acquisition of TellMe the other day for $800 million. While these deals are in different spaces, this is another step along the way to what's looking like an expensive showdown between these two giants.

While Cisco and Microsoft enjoy a close working relationship on a few fronts, it's clear that they both want to control the enterprise communications space, and their visions do not seem to allow for more than one of them to do that. Regardless, $3.2 billion is a lot of money, especially for a company that only does about 1/10th of that in sales. Of course, Cisco spent a lot more to acquire Scientific Atlanta, so we may not have seen the biggest deal yet.

It's hard to tell where this is all going or when it all ends. Both companies have money to burn, and at this stage of the game, time to market is everything, and it's simply more expedient to buy rather than build. Of course, there's the ongoing challenge of integrating these companies once acquired, and figuring out the details about branding, channels, R&D, staff retention, etc. However, this is the price you pay to get what you need, and perhaps more importantly, to keep it out of the hands of your competitors.

There won't be any shortage of media coverage today about this, although I'm surprised at how little blog coverage there has been so far.

Rather than re-hash the details, I'll steer you to Business Week Online. Their feature is out already, and it provides a good overview of Cisco's deal and the overall context for what's driving this. They were also nice enough to cite me, so I'm more than happy to share this with you.



Technorati tags: Cisco, Jon Arnold, Microsoft, J Arnold & Associates, Business Week

Geosign Raises $160 Million - and Just Where is Guelph, Ontario?

So, who is Geosign, and how did they raise $160 million???

I'm asking the same questions myself. Geosign is a small, quiet company based in Guelph, Ontario - an hour or so from Toronto. Who knew???

It's a great Internet story for sure, and possibly a Web 2.0 story. They're an "Internet media" company, and it just shows how these success stories can truly come from anywhere. Guelph is in the middle of nowhere - a landlocked, agricultural town - barely big enough to be considered a city. I've been there a few times, and it's got a very interesting history. More importantly, though, it's in close proximity to Ontario's Technology Triangle, which is one of Canada's leading centers of tech innovation, most notably the home of RIM, and many others. More on that in a moment.

For the details, I'll steer you to today's Globe & Mail, which has a good writeup on Geosign and what they're going to do with all this money. As the article explains, Geosign has developed a network of 180 websites, all providing information for consumers on a wide range of goods and services. I'm not much for web surfing, so this is all news to me.

If you're curious, here's what one of their sites looks like - gizmocafe. Pretty plain, vanilla, mass market type of stuff. Nothing complicated, but hey, Geosign claims to attract some 35 million visitors a month to its sites. Can you imagine how many they'll be able to attract now? Gotta like their formula - dang, why didn't I think of that???

The item that really stood out for me in the article was the fact that this is the largest raise of private capital in Canada, and the largest in telecom/tech since Vonage raised $200 million in 2005. That's pretty impressive, and tells you that software and web-based businesses can still attract big money.

Mark Evans posted on this Wednesday, and his post includes a brief interview with their CEO, Ted Hastings.

I just wanted to add a brief comment about the size of this deal. Aside from its sheer scale, it says a lot about the potential that investors are starting to see in the Internet and online businesses. While it's surprising to see all of this coming from a low profile company based in a small city, it's not surprising that the funds are coming from the U.S. Followers of my blog may recall my visit to last year's Canadian Venture Forum. Canada may get its fair share of domestic VC placements, but the size of these deals is smaller than what U.S. companies get. It's hard to imagine any Canadian firm putting this amount of money into a company like this.

That said, you don't have to look far to see how hard it is to get funding up here, so in the IP communications space, there are still challenges for sure. I'm close to more than one startup here that has great technology, has done a lot of the right things, but still cannot get a deal. Makes you scratch your head and wonder how one company can get so much money, while so many others are hanging on by a thread. And to think how far these companies would get if they could just hive off 5% of Geosign's pot of gold. They're not going to spend that money Vonage-style, that's for sure. Geosign is bankrolled now to do some big things, and that's got to include acquisitions. I have no idea what their management structure or vision is like, but they're in a great position now.

On that note, I just may get to give Geosign some ideas about this myself. I'm in the process of organizing a mini-tour later this month of the Waterloo region, of which Guelph is part of, and Geosign is definitely on the list. Good timing!

This is coming as a result of my recent connection to Waterloo City Councillor, Mark Whaley, who has been encouraging me to this. It's in the works as we speak, and aside from my upcoming visit, I plan to do some podcasts about these companies afterwards.

Finally - just a small thing. You know what I like about this company? They spell their name Geosign, and not GeoSign. It's just so predictable the way companies concatenate two words with capitals. I'm old school that way, and am not a fan of forcing two words together that really don't belong together, and making it look right by using capitals. Enough. BackToWorkNow.


Technorati tags: Geosign, Jon Arnold, Tech Triangle