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CounterPath Acquisi tions Expand Markets, Position Company in FMC

By: Charlotte Wolter

Two years ago CounterPath Corp. was, so to speak, a one-trick pony, a company providing the leading SIP soft phone for consumer VoIP services but little else.

Two years and several acquisitions later, CounterPath has broadened the markets for its Windows-based software, which now include fixed and mobileVoIP for consumers, enterprises and service providers as well as fixed-mobile convergence (FMC).

Construction Job

CounterPath has built a wider focus on a spate of acquisitions in 2007 and, especially, early 2008. Before, the company had modest but steady growth in the narrow consumer VoIP market. Long-term prospects were less certain in a market that features giants, such as Skype, Yahoo! Inc. and Microsoft Corp.’s MSN, with millions of users for their consumer soft clients.


Nevertheless, CounterPath has a broad customer base for its consumer clients that includes many of the largest voice service providers in the world, such as AT&T Inc., Verizon Communications Inc., Vonage Holdings Corp., BT Group PLC, and Deutsche Telekom AG. Telecom equipment vendors, such as Cisco Systems Inc., Alcatel-Lucent and Nortel Networks Inc., also used the CounterPath soft phone products in a variety of applications.

In June 2007 CounterPath announced the acquisition of NewHeights Software Corp., which brought an enterprise soft phone and IP application server. However, the most significant aspect of the NewHeights deal is that it brought new management — NewHeights CEO Greg Pelling became CEO of CounterPath, and founder Mark Bruk moved to Vice Chairman of the company’s board of directors — and a new investor. Terence H. Matthews, Chairman of Mitel Corp. and private-equity firm, Wesley Clover, became the Chairman of CounterPath, and Wesley Clover invested in the company. After the deal CounterPath was debt free, and had access to $8 million in cash and cash commitments.

After the New Year, the company moved quickly on two other acquisitions. On January 29, 2008, CounterPath announced an agreement to acquire FirstHand Technologies Inc., a provider of client software for FMC between enterprise PBXs and mobile phones. The company’s software enabled mobile phones to use PBX features, including direct dialing to extensions, and for mobile features to be accessed from the desktop.

A week later, CounterPath announced the acquisition of BridgePort Networks Inc., a provider of FMC systems for service providers. CounterPath BridgePort Networks and Oberthur Card Systems had collaborated a year earlier on a fixed-mobile convergence soft client, called MobileSTICK, which was a SIP soft client and supporting software, plus aGSM SIM card packaged in a USB flash drive. When plugged into a PC, the USB device launched a soft phone for calls over WiFi networks while providing a GSM connection when WiFi broadband as not available.

BridgePort had seen investment of more than $40 million to develop its fixed-mobile convergence technology assets, and the acquisition brings CounterPath multiple technologies for the service-provider FMC space. BridgePort has a server component that acts as a gateway between a mobilesoftswitch network and a SIP network. “What BridgePort gives is to address mobile operations and to give a solution that can bridge features from the mobile network onto the fixed network,” says Jason Fischl, CTO, CounterPath.

These acquisitions take CounterPath “into grounds where we can go into all sorts of businesses very quickly and generate enough revenue today to pay the bills,” says Pelling. “It is one thing to be a consumer client, but it is totally different to be an enterprise, small to medium-sized business and mobile FMC offering.”

CounterPath and FMC

CounterPath’s reinvention of itself includes strong moves into fixed-mobile convergence, especially for service providers, but CEO Pelling is cautious when asked about the growth of the FMC market. “None of us have a crystal ball,” he says. “If we really move into a recession, then it will be pushed out a few quarters. But we think we see fixed-mobile convergence start late this year or early next year” in North America.

Opinions on the prospects for fixed-mobile convergence vary. Philippe Winthrop, Research Director, Aberdeen Group, a research and consulting firm that focuses on enterprises, says, “I think FMC is the next great thing in enterprise mobility.” Fixed-mobile capabilities, “will be for voice what push e-mail was for your desktop email,” Winthrop says. ‘It doesn’t matter where you are. Your mobile is your desk phone.” He adds that the convenience of one mailbox and ubiquitous communication whether in or out of the office will outweigh additional costs for enterprises.

On the other hand, Keith Nissen, principal analyst, In-Stat, a division of Reed Elsevier, says fixed-mobile convergence is likely to reduce revenue from enterprises. “I don’t see that mobile operators will be pushing enterprise FMC because it will not grow revenue. It will shrink revenue.”

Besides, in North America, Nissen points out, most enterprises do not subsidize mobile phones. “I could see for executives, rather than having a desk phone, they can have a mobile FMC phone to use with on-premises WiFi to make calls when in the office and it will operate as normal FMC elsewhere. That’s feasible but relatively small potatoes.” Rather than large enterprise, “The big market is in the small business, those who run a business out of the home or are an owner. There they would like to have one phone and be able to least-cost route the calls wherever they are,” says Nissen.

Whatever the outcome with FMC, CounterPath is likely to use its new-found technical and financial resources to explore other opportunities, possibly venturing into platforms other than Windows. Although Microsoft dominates on the PC, Symbian, Research in Motion (RIM Blackberry) and Palm, not to mention Apple, also have large market shares in mobile phones and computing. CounterPath already provides products for Windows, as well as RIM and Symbian (with its acquisition of FirstHand), though Windows predominates and its packaged soft phones are aimed mostly at PC platforms. It will be interesting to see if CounterPath can leverage its current client products into new kinds of devices, codecs and services.

Charlotte Wolter is a TMCnet contributing editor. Wolter has been a technology journalist and analyst for 20 years, managing publications, writing articles and reports, and providing consultation about market trends.

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