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August 09, 2006

Eicon Networks Buys Intel Dialogic Division: Analysis

By Rich Tehrani, President and Editor-in-Chief


As I have been writing about for a few months, the Dialogic Division of Intel (News - Alert) has been sold. Eicon Networks (News - Alert) is the buyer and I am looking forward to finding out more details and sharing them with you.

This is potentially good news for the entire communications space for the following reasons. This division of Intel had the massive resources of corporate behind them but the challenge was for such a large company to focus on so many things. There are obviously synergies that will be lost as a result of this division being sold but on the flipside, if this newly freed division goes back to its super-aggressive Dialogic ways, it could result in much more rapid growth for not only for them, but also for the industry as a whole. Some of the best people in the industry in fact work for this division of Intel and I wonder what they can accomplish as a result of being in a nimbler organization.

Intel is still in the communications business mind you. They are keeping their core communications and embedded businesses, including Intel Architecture and network processors, modular communications platforms and optical modules.

A bit of history

In the 1990s when Dialogic was promoting computer telephony, an entire sector was built and many of the products and technologies we take for granted today were a result of Dialogic seeding the market with education, products and ideas.

The IP-PBX we take for granted today is a result of years of work from companies like Dialogic, Rhetorex, Brooktrout (now part of Cantata), Aculab (News - Alert), Natural Microsystems and others.

Over the years, VoIP gateways replaced international callback solutions. These solutions allowed an international caller to dial a US-based telephone number and hang up. At that point, a call originating in the US connected multiple parties together at much lower US telephone rates. Most international callback solutions were based on DSP resource boards supplied by companies such as Dialogic.

When Dialogic was swallowed up by Intel, it legitimized the communications development space and the potential of media processing and host media processing, or HMP. It also took a company that moved fairly quickly, and put corporate constraints on them. As a division of a much larger company, Dialogic had infinite resources but couldn't execute as fast as they could in their glory days.

If there is one thing that is constant, it is the speed of technology, and the communications market seems supercharged. The pace of change and innovation in this space is mind-blowing. I remember back in the late nineties I was giving a keynote to hundreds of resellers at Inter-Tel's (News - Alert) annual conference and a few of the resellers came up to me afterwards and asked if they should start selling PC PBXs or wait for IP PBXs? I explained the PC PBX was in fact a few years old and had become obsolete overnight.

Now of course innovation happens even faster. We wish a technology could last years at a clip. For example, IMS or IP multimedia Subsystem is one of the hottest areas of communications and in only a few months, A-IMS was released as an advancement to IMS. Since communications technology moves at a blistering pace only the fast will survive. Infinite resources are great, but rapid execution and focus will win the war over time.

Of course, speed is only one factor in a company's success. Another major factor is relationships. On that note, a major positive of this transaction for Eicon is the relationships between the Dialogic division and the Intel communications division. These teams have worked together for many years and I expect the relationships to help both companies for many years. In addition, the communications division left within Intel could flourish, as they too will be leaner following this transaction.

If the positive of this transaction is a speedier company then what is the downside? Typically, the downside to spinning off a division is that customers may see a smaller company as riskier to deal with. But, the sheer scale of the new Eicon Networks relative to its competition will likely make this point moot.

So who loses in this deal? I haven't had a chance to study the details but I can't see a loser. I see customers as better off, I see the people who work at this former Intel division as better off and amazingly I think the competitors of the old/new Dialogic will do best of all.

I say this because the old Dialogic really helped define the vision of the industry. Sure, we can credit NMS with using their DSP resource boards to build the first VoIP gateways but in general, Dialogic set the pace in the 90's.

So, my hope is to see Eicon Networks take over where Dialogic left off in 1999 when it sold to Intel. The opportunity is there and both the Dialogic team and the existing Eicon teams are very talented. I hope to see great things as these two companies join forces.

Perhaps most interesting is the timing of this release as it takes place during the week of TMC's VoIP Developer (News - Alert) Conference, the world's only IP Communications development event. This may be the largest communications development news all year.

See also: Eicon Networks to Purchase Intel's Media and Signaling Business.

Rich Tehrani is President and Group Editor in Chief at TMC. In addition he is the Chairman of the world’s best attended VoIP event, Internet Telephony Conference & Expo.

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