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April 05, 2006

Aladdin Finds His VoiceGenie

By Robert Liu, TMCnet Executive Editor

In planning out its latest acquisition internally, Genesys (News - Alert) Telecommunications Laboratories’ President and CEO Wes Hayden amusingly code-named the project “Aladdin.” And with Wednesday’s announcement that the Alcatel company will acquire VoiceGenie, Aladdin might have gotten his wish. But ‘a Whole New World’ comes at what price?
Since the advent of VoiceXML as an industry standard, the voice portal market has remained in a state of flux with customers increasingly opting to swap their legacy IT systems out of costly proprietary solutions and into an open architecture that helps simplify new applications development and deployment. As such, vendors like VoiceGenie have been helping big customers take advantage of VoiceXML to roll out self-service solutions in enterprise contact centers or services like directory assistance and virtual receptionists for telecom service providers.
Genesys, meanwhile, has been organically growing its own voice portals practice since it bought its way into VoiceXML in 2002 when it scooped up Telera for $136 million, which until today represented the only other time that technology served as the primary impetus for its acquisition strategy.
“This gives us the path to really accelerate the market going forward,” Hayden told analysts on a conference call Wednesday morning. “That's clearly an area that we have the intentions to provide great focus and maintain a leadership position.”
Together, Genesys and VoiceGenie will be the undisputed leader of the voice portal segment with almost 25 percent market share. That’s almost 2.5 times the size of its closest competitor. And the companies customer base are both very complementary, meaning there will be very little cannibalizing of sales.
Whereas a bulk of Genesys’ voice business has been “call center-centric,” (as Hayden described it) meaning focused on the enterprise market in particular, VoiceGenie has been very successful in the service provider space. In fact, VoiceGenie’s growing success in attracting enterprise customers is what contributed to Genesys taking notice in the first place, he explained.
“It gets them to an incredible level of critical mass,” said Sheila McGee-Smith, president and principal analyst at McGee-Smith Analytics. “VoiceGenie has strong carrier customers. VoiceGenie’s history is they started the whole VXML movement with AT&T (News - Alert) about 10 years ago. They come from a very strong carrier legacy.”
But Genesys’ magic wish comes at a relatively high price. While terms of the transaction remain undisclosed (except to say that it was financed with cash and Hayden declined to disclose how much cash his company had on its year-end balance sheet), he did though confirm that Genesys paid a multiple equivalent to 1.5 times their projected yearly revenue for VoiceGenie.
If that’s the case, then VoiceGenie was able to command a multiple at the high end of the range. For example, when Intervoice acquired Edify for $33.5 million in cash from S1 Corporation, that deal was valued at only 0.9 times revenue. And that was the valuation that Genesys used in evaluating the assets of GMK of Brazil earlier this year.
During the Q&A portion of this morning’s conference call, Hayden also confirmed that Genesys wasn’t the only suitor that was courting VoiceGenie, which may explain the premium paid to the Toronto-based VoiceXML innovator.
“I don't think they needed it. The technology they have is very similar,” McGee-Smith told TMCnet during a brief telephone interview.
In rebuttal, Hayden claims that Genesys is getting more from the VoiceGenie acquisition than it has in its previous buyouts: GMK, Telera and CallPath, which was acquired in May 2001 from IBM (News - Alert). “Each of those acquisitions offered a different dimension,” Hayden said.
“With Telera, we wanted the technology and we wanted the people,” he said. But with CallPath and GMK (affectionately known locally as “Gimme-Ka”), the acquisitions were more about adding customers and skilled workers than intellectual property.
“What makes this [VoiceGenie] deal so exciting is they've got all three,” Hayden added, referring to its vanguard technological developments, marquee customers and talent pool of 90 employees. In fact, upon completion, Genesys will have a combined workforce of 130 to 150 engineers just dedicated to VoiceXML development.
The transaction is expected to close in 30 days. Upon completion, the two enterprise voice portal companies plan to forge ahead with integrating their two VoiceXML-based platforms into a single offering to serve enterprises, service providers and carriers alike. The public strategy of the integration project will also be known as Aladdin.
Project Aladdin is expected to yield an integrated, universal voice platform by the middle of 2007. No word yet on whether the combined company will re-brand that solution under the Aladdin name.
Robert Liu is Executive Editor at TMCnet. Previously, he was Executive Editor at Jupitermedia and has also written for CNN, A&E, Dow Jones and Bloomberg. For more articles, please visit Robert Liu's columnist page.

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