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November 14, 2011

GENBAND Looks at Present, Future, Hints at IPO

By Doug Mohney, Contributing Editor

Earlier this week, GENBAND (News - Alert) held its Perspectives analyst and trade press briefing. The company described it as a “unique” event because it is privately held and therefore not limited/constrained in how it presents information and handles the meeting due to SEC (News - Alert) regulations – including strong hints at an IPO in the next year, if conditions are right.

“If GENBAND was not a private company, we wouldn't be able to give this perspective,” said GENBAND President and CEO Charlie Vogt (News - Alert) in his opening remarks.

Today, GENBAND has around 2,200 employees, with 1600 originating from the Nortel (News - Alert) CVAS bankruptcy acquisition in 2010. The company had in the neighborhood of over $700 million in revenues over the past year and plans to put $130 million into R&D over the next year. It boasts of serving 80 of the Top 100 operators around the world.

GENBAND is now not a telecom hardware manufacturer, but a software and services company, according to executives. Its GENiUS platform uses industry standard ATCA hardware that is simply customized by loading in software. Customers can mix and match applications by loading multiple software modules to do things such as application server, access and media gateway control, and session border control (SBC). If you need to scale, add blades or more boxes.

GENBAND sees the worldwide market opportunity over the next decade for TDM switch replacement as huge.   The company currently has about 8,500 TDM switches in the field, plus another 12,2000 IP switches, with roughly 10 to 15 percent of the world's market share.

“Three hundred million dollars of network transformation happens every year with GENBAND,” claimed Vogt, but that numbers is not just switches.   The company also provides professional services on the front end to help with network design, then “clean up” for central offices to consolidate legacy gear before rolling in a switchover to an IP architecture.

And the clock for existing TDM switches is starting to tick louder every day. Switches were designed for an average life of 25 years have already been in service an average of 30 years with some on the upper end of 40 years. With only 20 percent of TDM lines transitioned to IP, there's plenty of room for growing market share.

“In the 2013-2014 timeframe, we see significant acceleration coming out of network transformation,” Vogt said.

Longer term, GENBAND expects growth to pickup in the SBC market, where it currently has about 5 percent market share and is number four overall.   Further out, deep packet inspection (DPI) is expected to payoff in a big way as carriers start mining usage information to offer customized broadband packages and more service-based revenue generating products to customers.

Several times during the course of the Perspective briefings, Vogt hinted GENBAND is looking at an IPO. At one point, he went so far as to ask two financial analysts sitting on a panel as to what Wall Street would be focused on.  

“It depends on the month, the day of the week,” said one flippantly, before expanding. “The market is hungry for growth, a sustainable business model, a trajectory for growth, and demonstrate a stewardship for earnings growth.” 

While GENBAND may not be doing an IPO next month, the company certainly could make a case for one within the next year based upon switch replacement and network transformation.

Doug Mohney is a contributing editor for TMCnet and a 20-year veteran of the ICT space. To read more of his articles, please visit columnist page.

Edited by Jennifer Russell
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