CTI Pioneer Expands into Video, Broadens Service Provider Portfolio
Dialogic (News - Alert) in the mid-nineties was the major company producing hardware and software building blocks in what we at the time called the computer telephony, or CTI, arena. The company’s DSP resource boards at first powered simple voicemail systems. Over the years, however, Dialogic has been active in mergers and acquisitions, and continued to expand its portfolio to deliver a wider variety of platforms to enable value-added services.
The expansion has not abated.
Dialogic this spring announced plans to merge with Veraz Networks in a deal that could close as early as this month. Meanwhile, the company is working on a strategy to expand its play in video.
President and CEO Nick Jensen is leading the charge. He’s the charismatic figure responsible for rescuing and reinvigorating Dialogic.
Jensen’s former company, EiconNetworks, bought Dialogic from Intel (News - Alert) in 2006 after the chip maker opted to divest those assets. Intel had purchased Dialogic in July 1999 in an effort to increase its play in the communications space. But Intel eventually realized telecom components were not its core market, so it put those assets on the block a few years later.
EiconNetworks was ready to play let’s make a deal. Dialogic was a good match for the company, which got its start selling X.25 cards and modems, but saw that business erode with the arrival of IP technology. As a result, it began introducing products that competed with Dialogic boards. So when the Dialogic opportunity came along, EiconNetwork jumped.
Realizing the value of the Dialogic name, Jensen resurrected it. He then proceeded on a spending spree.
The new Dialogic in 2007 purchased Cantata, which was the result of the combination of Brooktrout (News - Alert), a leader in fax servers; Excel, known for its programmable switches; and SnowShore, which sold IMS-based IP media servers. A year later came the NMS deal, which gave Dialogic boards that service providers use to deliver color ring back tones, network-based voicemail and the like.
Then, in May of 2010, Dialogic announced its latest merger partner, Veraz Networks.
Veraz in the last four quarters had revenues of about $65 million. But while the Veraz deal is only slightly larger than the Cantata and NMS ones in terms of revenues and the number of employees involved, it’s significantly different because it will transform Dialogic from a private to a public company.
Following the close of the merger, Dialogic will be listed on the NASDAQ. The company has registered for the ticker symbol DLGC, which was the old Dialogic symbol in the 1990s.
The combined company will have revenues of greater than $250 million. Dialogic shareholders will own approximately 70 percent of the new company, with Veraz shareholders getting the remaining 30 percent. Jensen will remain as CEO of the larger Dialogic; Doug Sabella of Veraz will be the new COO.
Among the primary motives of the Veraz deal is to get publically traded currency to do even more deals, says Jensen, who adds that Veraz has plenty of cash.
“Nick has been consistent in saying it’s part of our DNA and we will do more” mergers and acquisitions, says Jim Machi, senior vice president of marketing at Dialogic. “But there’s nothing imminent.”
Veraz also will give Dialogic a bigger presence with service providers, an area in which Dialogic expects to see growth. The company brings to the table a bigger gateway; bandwidth optimization tools; and a session border controller.
"While the capability of mobile networks around the world has been steadily expanding, the future will bring even greater demands on the networks due to the unprecedented growth in global mobile data and video traffic," says Jensen. "By combining Dialogic's proven expertise in application enablement for voice and video with Veraz's leadership in voice, data, session control, security, and transport, we will be creating a company with innovative products that will enable our customers to unleash the profit of video, voice and data for 3G/4G networks."
More than 80 percent of the Fortune 2000 companies and service providers worldwide rely on Dialogic's application-enabling technologies. Those technologies include board-level IP/TDM products including the DM3 line (a homegrown Dialogic solution), the CG (from the NMS acquisition) and TR1034 fax boards (that came from Brooktrout). Dialogic also sells software-based multimedia solutions under the brand PowerMedia; Machi says this is where the company is focusing a lot of its video development. And Dialogic’s current 1U platforms include BorderNet TDM/IP gateways, the Vision family of video gateways, a media development platforms called MSP, and a signaling gateway called SIU. These are products on which developers including Interactive Intelligence (News - Alert) and Unisys, and service providers, build applications like IVRs or voicemail systems – or such applications with an added video component.
Meanwhile, more than 130 service providers in over 80 countries rely on Veraz's next-generation switching and bandwidth optimization products and services.
While the Veraz bandwidth optimization technology is currently focused on voice applications, Dialogic could expand that to apply to video applications in the future, says Machi. Veraz has a 20:1 compression ratio with minimal to no voice degradation. In a world in which wireless bandwidth is in short supply, having solutions that can effectively compress video becomes quite important. Expect this technology to come to a video stream near you, especially if you live in India.
The company is developing new solutions within Dialogic Media Labs, an effort that stemmed from its 2008 acquisition of OpenMediaLabs. The business unit does research on such things as adaptive codecs, which can alter the codec dynamically based on what’s happening on the network; quality of experience, which can involve using limited bandwidth to focus on moving parts of the picture instead of static background, for example; and more.
While some of this video-focused work is relatively new, Jensen has been talking about the video opportunity for years.
One clear area of growth in this realm is over-the-top video on the mobile phone. Jensen believes this market will see more user-generated content as opposed to YouTube (News - Alert), as the handset is the center of the user's universe. He thinks these markets will be transaction based, meaning there’s an increasing opportunity for carriers to monetize their technology investments.
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Edited by Jaclyn Allard