Mandelstam on Sangoma's Paraxip Acquisition

On July 7, Sangoma Technologies (News - Alert) announced it had entered into an agreement to acquire all of the shares of Paraxip Technologies for $4.8 million, payable as $1.9 million in cash and 2.3 million in Sangoma common shares.

I had the opportunity to speak with Sangoma CEO David Mandelstam (News - Alert) regarding the acquisition and what it means for the future of the company. Due to space limitations, only excerpts from my conversation with Mandelstam are published here. The interview can be found in its entirety online (www.tmcnet.com/2229.1).

GG: What is the main reason for the Paraxip acquisition?

DM: If you’ve ever spoken to me, one of the things that always comes up is that most acquisitions don’t work. The rate of success of acquisitions is fairly low and in order for an acquisition to work it has to work on many different levels. It has to fit very closely with the business of the acquirer and the goals have to be the same and everything has to work. And we feel this is that kind of acquisition.

The main reason was to get the technology we needed in order to have a full product offering. The second thing that we got with this acquisition is we get a completely different but complementary marketing team and completely different but complementary set of customers. None of their customers intersect with ours, which is interesting. It’s a completely new Rolodex.

The emphasis changes quite a lot. It becomes a different business.

And then there is a great deal of management strength that we could really do with going forward. You know, talented people are always hard to find. And they (Paraxip) have a very talented group.

GG: How do you respond to people who view this acquisition signals a move away from the open source market for Sangoma?

DM: It certainly doesn’t. It adds another string to the open source bow. For instance, our SS7 and BRI support includes a proprietary component and because it includes proprietary components, which are licensed and paid for and all the rest, it means that customers can use it in a carrier grade environment, knowing that the BRI stack is commercial, has been around for a long time, has been tested in many environments, has been certified all over the world, and therefore it’s one other thing that you don’t have to worry about.

The other thing that we do is we get a chance to bypass some of the older drivers. We see this as being great for the open source community.

GG: In terms of your unified communications strategy, how does the acquisition of Paraxip enable Sangoma to be more of a player in this space?

DM: Well, the unified communications space is a typical space where they really don’t care about low-level APIs and they’re not interested in working with them. Unified communications development is all done in the “voice as a software service” space, which is primarily VoIP-based, and they really don’t care about the PSTN interface. In order to play in that space, you have to provide an API, which is appropriate to that space, and that API happens to be SIP. So the acquisition gives us an entree into that space, which we never had before.

There’s no way we could integrate a product like Microsoft (News - Alert) Speech Server into our card. It’s a prodigious amount of work, because they don’t have the kinds of hooks you need to do it. And if they did have those hooks, they would be at a very high level. So the SIP interface allows us to bypass that and get into this space.

GG: Please describe how the acquisition of Paraxip will help address the call center market.

DM: Paraxip lives in the call and contact center market. That’s primarily the place where they have had most of their success. They have certain technologies, which are unique and somewhat protected by patents. One of them, which is very attractive, is the ability to identify an answering machine roughly to the same accuracy as a human can identify an answering machine. For call centers who have limited answering machine detection, the fact that they can improve provides a huge jump in productivity.

GG: Is this merger going to work?

DM: Well, that’s in the hands of the angels, now. If it doesn’t work, it will probably be our fault, but it really should work. It’s one of those things where it’s yours to lose.

It really looks like one of those very rare situations where an acquisition is actually going to work well for both sides. And believe me, acquisitions were not something that I was ever very keen on, and the fact that we’ve done it... Well, I am a hugely cautious guy, and this one has been well researched and we think it’s going to work very well. IT

– Greg Galitzine is group editorial director for TMC (News - Alert).

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