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UC Mag
Rich Tehrani

Group Editor-in-Chief

On The CounterPath to Success

If you want to build a perfect business plan, sometimes it makes sense to look at what has been successful in other markets and apply the same techniques in another space. McDonalds showed the world that a restaurant could become a successful worldwide chain and as such we have many worldwide restaurant chains today. This first successful chain shows the world that it can be done and the followers have an easier time and can even learn from the mistakes of the first.


In communications, we often borrow from the information technology space when looking for successful ideas. There are a few things the tech market has taught us over the years. One is that if you own the software on the desktop, it is possible to leverage this relationship with customers to expand into other areas such as databases and servers. For example, Microsoft cleaned Novell's clock in the 1990s by extending its dominance from the desktop to other areas.


While Microsoft has developed much of their software organically, Cisco established a marketing and sales machine with strong customer relationships and then purchased complementary technologies and rolled them out to their worldwide salesforce. Cisco is a technology company but it is their sales and marketing machine that makes the difference. They also know how to acquire companies and are the grand wizards of M&A. I don't want to call anyone else out but I can ascribe billions of dollars in lost shareholder value to Cisco competitors who never learned how to acquire new companies.


Cisco and Microsoft also have strong management and although there are some calls for Steve Ballmer to step down after the failed Yahoo acquisition, no one can argue that Ballmer is one of the most passionate leaders in tech and in fact, if anything, he may be accused by some YouTube-watching detractors of being too enthused about what his company does.


I couldn't help thinking about Microsoft and Cisco when I recently met with Donovan Jones of CounterPath (www.counterpath.com) in Vancouver to discuss what his company is up to. You know CounterPath as a company that makes softphones which run on your computer and smartphone. Their smartphones are really everywhere - private-branded by carriers and NEMs and sold as a standalone package and even distributed for free in a limited-feature version.


Think of the CounterPath smartphone as the communications equivalent of the desktop OS for office applications. What you may not be aware of, however, is that this leading softphone maker has been on an acquisition spree which has resulted in a company with hoards of intellectual property in some of the fastest-growing areas of telecom. In many cases, CounterPath has purchased companies with great technology but lousy marketing - so the goal here is to use the global relationships CounterPath has and sell these great products worldwide. In many cases, when CounterPath made these purchases, the investors in the original companies actually invested more in CounterPath. This is not a typical situation and to me signals greater belief in CounterPath's management than the management of the original companies.


Here are the companies purchased and their dates of acquisition:

  • NewHeights, August 2007
  • BridgePort, February 2008
  • FirstHand, February 2008


Here are some of the new solutions the company now has in its arsenal:

  • Network Convergence Gateway Solution - enables users to receive cell phone calls over the internet with a single phone number.
  • Enterprise Mobility Gateway Solution - extends office communication features and applications to mobile handsets.
  • Quick Conference Solution - a feature-rich, cost effective and flexible SIP-based audio conferencing application.


With softphones, FMC and UC all projected to grow rapidly in the coming months and years, CounterPath is positioned well to fulfill the needs of the business and carrier markets.


But the company is also positioned to capitalize on the mobile market if wireless service providers allow themselves to be helped. You see, one of the products the company now has as part of the BridgePort Networks acquisition is called MobileSTICK. It's a USB card which attaches to a computer and authenticates it like a SIM card. Once this is done, calls to and from a wireless number can be transmitted via IP communications over broadband directly to the computer.


This means that wireless carriers can take traffic off their expensive cell phone towers and while they are at it they can also encourage users to send SMS and MMS messages from the computer or laptop where they have a much better UI than on a phone. Sure, all those kids sending text messages today have great eyesight but you can only stare at a 2x2 inch screen for so many years before your eyes start to go and you need a bigger screen. And yes you can just send email from a laptop but the cool factor of mobile communications is sending from your mobile device - even if your friends don't know you are secretly using a computer. Also, if you send email from your laptop and then leave your computer, the response won't reach your cell phone. Jones also points out that this technology allows wireless roaming to take place over VoIP over broadband or WiFi.


This means cellular companies have a new business model allowing them to drastically reduce the amount of money they have to pay other carriers in places like Europe. In the enterprise, the company competes head-on with Microsoft but without the need for OCS. You get a working softphone, and plugs-in for SameTime and Outlook. Jones believes people don't want a separate telephony application but instead they prefer a telephony extension of their applications. This is why the CounterPath's software has the ability to drag-and-drop participants into a conference call from a messaging client, for example.


I have never been bashful about sharing new buzzwords with you, so I didn't filter the assertion Jones makes about his solutions being UC 2.0. There is a certain truth in the fact the company is ahead of the competition in terms of bringing UC to the carrier and enterprise. You see, the Vancouver-based company's products already work in carrier networks, which means the flexibility of combining a best-of-breed carrier/enterprise solution is built-in. In fact, you can choose which components reside where (cloud or premise) in your particular implementation.


It is worth mentioning that the company seems to be riding the jet stream created by those PBX companies scared of Microsoft putting them out of business. Simply stated, this means we may see more enterprise communications companies pushing CounterPath to ensure Microsoft doesn't get a stranglehold on their customers.


I can't go to Canada without discussing Terry Matthews at some point - it just seems to me he has a hand in virtually all Canadian telecom as well as investments in tech companies worldwide. When CounterPath purchased New Heights, they added Terry Matthews to the board and got Owen Matthews (Terry's son) as an influential salesperson. Jones explains that Matthews opens doors to just about any carrier in the market and as you can imagine this is a yet another great benefit the company has going for it.


A few months ago, the blogging community went wild regarding an analyst report discussing how global providers would work together to come up with a Skype competitor. They said it made no sense and wouldn't work. At first I started to agree but I soon realized that if they leverage mobility, SMS, MMS and other benefits of MobileSTICK technology, they could really have a great idea on their hands.


If everyone with a mobile phone installs software on their desktop which allows their mobile calls and SMS messages to follow them to their computer, would Skype not be faced with a massive competitor? Skype does a great job adapting its service to the mobile network but they can never have the seamless connectivity to mobile operators that these carriers themselves could potentially provide. Who would be at the center of such a radical idea? Someone who has a softphone which works with the majority carriers and the potential to link their backed-end systems with what lives on the PC of course. Can you think of such a company? No. Me neither. :-)


CounterPath is publically traded company and all this potential makes me think it is a good investment. I may even invest myself after this article is posted.


The downside risks as I see them are something happening to Terry Matthews or Donovan Jones. Both are some of the most charismatic people I know in the business and when they finish talking, customers feel like getting their checkbooks out.


There is also the marketing and integration risk. None of the companies acquired by CounterPath were known very well and in fact many of them lived in a marketing vacuum. CounterPath is wellknown but as a soft client company... Can they change this perception? It is unknown at this time.


Integration is something that has brought a number of companies to its knees. Jones allayed my integration concerns in my meeting with him by saying they generally took the R&D and engineering departments of the companies they acquired and the acquired talent believes in the grand vision he has for the company. Frankly, the acquired companies were pretty small, so ongoing integration may be a small issue.


As communications comes together and the move towards wireless, FMC and UC continues in carrier and enterprise networks, there is no company better positioned to take advantage of the trends than CounterPath. Few companies have the kind of potential CounterPath does and I can't help but wonder if their name will be seen in more articles along side of Cisco's and Microsoft's as we go forward.


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