Router maker Unisphere loses voice

By Ben Heskett, CNET News, 3 May, 2002 12:19

NEWS

Unisphere Networks announced on Thursday that it has shed its voice technology businesses to focus on its bread and butter: Internet routers. Under terms of the deal, privately held Unisphere will spin off its voice networking business to its parent and largest shareholder Siemens. Germany-based Siemens will then integrate the group with its Information and Communications (IC) Networks division. The pact will be finalised this quarter, according to the companies. Unisphere has quickly become a competitive provider of "edge" routers for service providers and corporations. Undaunted by the presence of larger rivals Cisco Systems and Juniper Networks in the market, Unisphere has rapidly gained market share in the niche, continuing to post impressive growth amid a sharp downturn in technology spending among both types of customers. The company claims it registered an 18 percent increase in revenue for its most recent quarter over the previous year. A Unisphere representative declined to break out sales numbers for the voice business, but the company's routing division brings in most of its revenue -- $52m for its most recent quarter, according to the company. Furthermore, much of Unisphere's voice technology was sold through a sales agreement with Siemens, according to analysts. By turning its voice business over to Siemens, Unisphere may be further cleaning up its books for a public offering of stock that is still on file with federal regulators despite the downturn in technology spending. Alternatively, the company could be streamlining its operations for a possible acquisition, since the market for networking IPOs is dismal at best. "It lets Unisphere focus," said Hilary Mine, executive vice president at industry consultants Probe Research. "They're not really a start-up anymore, but they still need to be focused" in this market climate. Unisphere has been planning an initial public offering since 2000, despite a worsening climate for networking companies. In its most recent filing, the company lowered the price of its expected offering to $11 to $13 per share. That filing has not been updated since August 2001. The move is expected to help Siemens make headway in packet voice networks, which break up a message into smaller packets for transmission. The deal is in response to customers' need for a single technology with more complex voice capabilities, the companies said. The deal also will let Siemens expand its access to the North American and Japanese telecommunications markets, which are expected to make up 45 percent of the world market for networking technology this year, Siemens said. Unisphere's existence has long been tied to Siemens. During the telecommunications boom of the late 1990s, German technology giant Siemens spent close to $1bn on North American networking start-ups, including a company called Castle Networks, to crack the lucrative telecommunications market. In addition, Siemens moved a telecommunications technology business that hoped to build the equivalent of a voice switch in software -- called a "softswitch" -- under the Unisphere umbrella. Now Siemens is digesting that business once again -- the product is called the SRX 3000 -- as part of its IC Networks division, along with the hardware and software culled from the 1999 acquisition of Castle, with the resulting product called the SMX 2100. Those businesses have likely been pressured by the precipitous downturn in telecommunications spending over the past two years. In addition, many service providers are relying on larger companies such as Siemens for voice technology, rather than risking their budgets on start-ups. Some in the industry have wondered whether Siemens would suffocate its Unisphere spinoff, but the company has repeatedly shown an independent streak, unwilling to be too closely tied to the sprawling German conglomerate. "The less Unisphere has to do with Siemens, the better off they are," Mine said. The new Siemens unit will continue to operate under the guidance of Eve Aretakis, the new president of the Siemens unit and former vice president and general manager of Unisphere's voice switching business. News.com's Tiffany Kary contributed to this report.

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