Alcatel has announced a definitive agreement to acquire TiMetra, a privately held maker of edge routers, for $US150 million in stock.
Alcatel said the TiMetra acquisition would allow it to fill out its IP routing portfolio with an MPLS-capable service edge device.
The company already offers a core IP router and an MPLS-capable multi-service core switch.
TiMetra's products will allow Alcatel customers to provision SLA-based VPNs and virtual private LANs (VPL). The market for these types of services was currently $US87 billion and expected to grow at a compound annual rate of 17 per cent in the coming years, Alcatel said, citing data from IDC.
Many traditional telecom companies are scooping up start-ups developing next-generation data networking equipment based on IP or more cost-effective multi-service technology in an effort to migrate their customers from circuit-based to packet-based infrastructures.
Tellabs last week swept up MPLS edge switch/router maker Vivace Networks for $US135 million, and Ciena acquired edge switch maker WaveSmith Networks for $US158 million.
The purchases are being encouraged by incumbent telecom carriers that would like to purchase and deploy the next-generation gear from start-ups but would rather rely on established, familiar vendors for ongoing service and support.
TiMetra did not have a product on the market yet. But its routers were to compete with edge devices from Cisco and Juniper, as well as Laurel Networks, CoSine Networks, and perhaps Redback Networks - a pretty tall order for a young company without a product to show yet.
“The company was ultimately faced with challenging both (Cisco and Juniper),” director of Technology Business Research, Bill Lesieur, said. “Timetra likely need another hefty round of VC cash to go to market with a finished product, so the investors likely saw the Alcatel deal as a good financial exit relative to the volatile market conditions.”
TiMetra will launch its SR-Series Service Router family at Supercomm in June.
Alcatel, meanwhile, needed an edge router to help grow its market share in high-end routing, Lesieur said.
Though Alcatel hardly registers a blip on the radar screen of router market analysts, Lesieur said the company would eventually overtake Avici Systems as the distant Number 3 player in high-end routing behind Cisco and Juniper and their 98 per cent share of the market.
Completion of the acquisition is subject to approval by TiMetra's shareholders, other customary closing conditions and receipt of the approval of the commissioner of the California Department of Corporations. The transaction is expected to close in the third quarter of 2003. Once the acquisition is completed, TiMetra will be integrated into Alcatel USA, which is located in Dallas.
