Fueled By Nortel CVAS Deal, GENBAND Continues Its Ascent

COVER STORY

Fueled By Nortel CVAS Deal, GENBAND Continues Its Ascent

By Paula Bernier, Executive Editor, IP Communications Magazines  |  August 01, 2010

This article originally appeared in the August 2010 issue of INTERNET TELEPHONY.

If your mama ever read you The Little Engine that Could, the story of GENBAND (News - Alert) may ring a bell.

The latter tale goes something like this: Once upon a time there was a little company with $2 million in sales and fewer than 100 employees. Through determination and hard work, it pushed and pushed to grow stronger and stronger, and it was able to overcome the $40 million glass ceiling that holds back so many organizations. Leveraging both organic growth and a strong M&A effort to make it up the mountain, GENBAND went on to become a formidable presence in telecom, with $800 million in expected pro forma revenue this year and 2,220 employees around the world.

But that’s not the end of the story. The company is looking to do additional acquisitions, considering an IPO, working to achieve organic growth of 3 to 4 percent a year, and seeking to get to a 15% operating margin model by 2011.

GENBAND has done a number of acquisitions over the past few years. That includes purchasing NextPoint Networks in the fall of 2008, Tekelec’s (News - Alert) Switching Solutions Group in April 2007, Nokia Siemens Networks’ Surpass IP trunking gateway product lines in April 2008, and both BayPackets Inc. and the Digital Central Office business of Siemens Networks LLC in late 2006. However, what really helped move GENBAND to the next level was its recent purchase of Nortel’s Carrier VoIP and Application Solutions Business, a deal it closed on May 28.

“There aren’t too many companies we can find that have gone from 80 people and a couple million dollars in sales to $800 million and 2,200 people six years later,” GENBAND President and CEO Charles D. Vogt tells INTERNET TELEPHONY. “What we just pulled off was pretty amazing when you think about it. Granted, we’ve taken GENBAND, even prior to Nortel, over the last several years and built it into a $150 million business that’s doing well.

“It’s one thing to have the insight and the vision and all of that,” he continues. “It’s another thing to actually convince a pretty sophisticated board, a pretty sophisticated shareholder base, and then convince the largest bank in the world – JPMorgan – to put up $400 million for a company as small as were to take on something so large.”

Calling the deal transformational, Vogt says there hasn’t been a comparable one in the 25 years he’s been in the industry.

“When we were a $25 million [business], we acquired a $100-million division out of Tekelec,” he says. “Here, three years later, a $150-million business is buying a $650-million division out of bankruptcy.”

Yet despite the scale of the Nortel deal, he adds, GENBAND already has done the bulk of the integration work needed to bring CVAS into the fold. Vogt says GENBAND had completed three out of the four main integration elements involved with the deal by its close date. The only thing that remains to be done on the integration front, he says, is to bring Nortel’s legacy IT systems under GENBAND’s next-generation Oracle system, which is used for sales, customer support and supply chain management.

“We had all of our product decisions, all of our people decisions, and all of the customer contracts and supplier agreements completely integrated and implemented the day we closed,” he says, adding that others that acquired Nortel assets are still thinking about and working through their plans related to those deals.

GENBAND in late spring/early summer visited more than 100 customers to discuss the deal. In that same time frame it held various meetings to bring both new and existing employees around the world up to date on how it will impact operations. And in late June GENBAND publicly unveiled its product roadmap, while pressing the message that it’s ready and able to offer end-to-end solutions to service providers of all sizes.

The centerpiece of GENBAND’s product portfolio is an IP platform called GENiUS. With GENiUS, GENBAND executives explain, the company is delivering an open, standards-based architecture that will help carrier customers simplify their networks. 

“GENiUS is an ATCA platform/chassis on top of which we have added our unique middleware, which is coming from CVAS,” says Micaela Giuhat, vice president of product marketing with GENBAND. “This is a middleware in which they’ve invested tons of money to be really the premier middleware for this type of platform. [It] provides carrier-grade reliability, resiliency, redundancy, scalability.”

The first products to be based on this new blade-based platform are the C20 (the softswitch from Nortel CVAS formerly called the CS 2000) and the S9 security gateway (which GENBAND introduced on an ATCA-based platform about a year ago, but which now has been adapted to run on the CVAS middleware). GENBAND expects to introduce additional products based on GENiUS over time.

“We will rapidly add the application blades as well as some call control blades,” says Giuhat.

In addition to introducing the new GENiUS platform and the first products to employ it, GENBAND has renamed a number of products.

A wireless call continuity application formerly known as WMG 6000 is now called the A6. The Adaption Application Engine (aka A2E) has the new handle A2. Both products, which came from Nortel CVAS, will be hosted on GENiUS in the future. These products fall into GENBAND’s A-Series.

As for the C-Series, in addition to the C20 news above, the Nortel CS 1500 now will be known as the C15. Meanwhile, the CS1600 product for rural markets is being renamed the C16.

“We really do have an enviable product portfolio that in the fixed mobile convergence world truly can offer what no one else is able to offer,” says Vogt. “We can go in and do a true Class 4 and Class 5 CO modernization, where we can begin to decommission TDM switches around the world.”

For IMS networks, both the C15 and C20 support access and media gateway control functions. The C3 (News - Alert), meanwhile, supports IMS media gateway control functions. The C3 is GENBAND’s call control platform and will come onto the Genius platform at a later date. That will complement nicely the capabilities of the C20, which is a full-size Class 5 softswitch, says Mehmet Balos, executive vice president and chief marketing officer with GENBAND.

“As you know, we never touted our softswitch capabilities officially or very aggressively because, remember, we sold to tier 1s through our OEM partners,” says Balos. “Our media gateways became the best of breed” via GENBAND’s partners like Alcatel-Lucent, Ericsson and NSN. However, he adds, GENBAND’s C3 softswitches are robust solutions that have been deployed widely by Leap Wireless and many others.

“So we are very experienced at doing these end-to-end solutions,” he emphasizes.

Vogt says one of the smartest things GENBAND ever did was to understand that the only way it would be truly successful at selling its technology was to enter into strategic partnerships with the big suppliers, which delivered its best-of-breed gateways as part of larger, integrated end-to-end solutions. Before the Nortel CVAS deal, when GENBAND had 40 sales people, 70 percent of GENBAND sales were fulfilled through a channel partner. But CVAS has given GENBAND global scale, independent of the technology, he says. As a result, GENBAND today has 250 sales people and more than 1,000 service employees, and Vogt expects 85 percent of that to come from direct sales this year.

“These were things that were very fundamental in our view as to how we were going to grow up, in order to not only control our own destiny, but to be able to scale the business,” says Vogt.

GENBAND’s flagship product, the G9 gateway, remains a key player in its new product strategy. It supports fixed, wireless and emerging solutions such as IMS voice and video transcoding as well as fixed mobile convergence. And the G9 product roadmap includes adding integrated session border control functionality, video, and enhancements to its existing high-definition voice capabilities. The G-Series also includes the G2 (News - Alert) and G6 Universal Gateways as well as the former Nortel CVAS MG 9000 and MG 15000 media gateways.

The S-Series session border controller portfolio, meanwhile, covers the new GENiUS version of S9, which GENBAND says now provides the highest scalability in the market; the S2 Security Gateway, a building block of FMC solutions such as femtocells, and Wi-Fi-based mobile data offload and coverage solutions; the S3; and the SR3 session router products.

Not only does GENBAND have a well-rounded product portfolio, it also now brings to the market a strong, global professional service organization. Alcatel-Lucent, Ericsson and Nokia Siemens Networks are the only other telecom equipment suppliers with comparable assets on that front, according to Balos. GENBAND’s professional services include things like maintenance service as well as consultation around network topology, network optimization, capacity planning, disaster planning and more.

“So this is going to be a very important element as we’re selling services to our tier 1” customers, he says, adding that the fact that GENBAND is supported by the leading bank, JPMorgan, gives big customers an added level of comfort.

“Definitely, we are more than capable of servicing large carriers ourselves directly at this time,” Balos says.

With Nortel CVAS under its belt, GENBAND now calls 600 service providers around the globe its customers. That includes two-thirds of the world’s largest service providers, including AT&T, PAETEC and Verizon.

“The one thing that we have to work really hard on is branding,” says Vogt. That will include building its profile in areas of the world like Asia, which may not be familiar with GENBAND, he says.

While GENBAND expects to gain more of its revenues via direct sales going forward,Vogt says he also plans to maintain the company’s close ties with its OEM partners.

“We have a very, very good relationship with all three of these companies, and they were very supportive in us acquiring Nortel,” says Vogt.

He adds that IMS is all about convergence, so as carriers move to converge mobile and wireline, and as adoption of LTE (News - Alert) and VoIP move forward, GENBAND will continue to be a very strategic partner for Alcatel-Lucent, Ericsson and NSN.

At the same time that GENBAND is moving forward with these alliances and finishing its integration with Nortel CVAS, the company is actively pursuing additional M&A opportunities.

“We’re looking at a lot of things, and just because we’re integrating a big business doesn’t mean that you’re not going to see us continue to be optimistic and trying to further opportunity while it’s in front of us,” says Vogt.




Edited by Stefania Viscusi
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