European giants Siemens and Ericsson are about to join their US counterparts in taking over small IP telephony companies, according to the US rumour mill.
Siemens reportedly wants to buy Gigabit router start-up Argon Networks in Massachusetts as well as Internet access router maker Assured Access of California. Both companies products target Internet service providers.
Ericsson is reportedly looking to acquire Maryland based Torrent Networking Technologies for approximately $400 million. Torrent's IP9000 router was initially targeted at enterprise customers but Torrent has refocused the product for ISP point of presence.
Representatives at the companies have declined to comment. But the deals would give Siemens and Ericsson some leverage in the flourishing IP convergence market. Sales of high speed data network equipment to service providers are taking off as the Internet and private IP data networks become the infrastructure for new multimedia applications.
"The Siemenses, Nokias and other overseas companies have been busy in Silicon Valley, and I think they're establishing some solid relationships and making some smart investments," said David Helfrich, general partner at Communications Ventures, a Silicon Valley venture capital firm.
Helfrich added that these companies have paid attention to Cisco System's successful strategy of acquiring innovative companies and want to emulate it.
The US equipment makers have already started their shopping sprees. To date, Nortel has spent roughly $9 billion to acquire Bay Networks, Cisco's longtime rival in IP routing.
Lucent has acquired smaller companies, such as Gigabit Ethernet start-up Prominet and remote access router company Livingston, but the company is expected to make a bigger purchase soon.
Cisco, at the same time, has been devouring smaller voice network companies such as Selsius Systems and Summa Four.
The IP telephony market is starting to hot up. AT&T said this week that it will launch two trials of its Voic-over-IP virtual private network service with user groups. AT&T last month rolled out its Global Clearinghouse, which will enable ISPs and telcos to operate phone-to-phone IP services to 140 countries.
"Internet telephony is expected to see tremendous growth and AT&T needs to be experimenting with that technology now," said Ruth Chatterton, an analyst at Telechoice.
Among corporate users, early adopters of Internet telephony will likely be medium-sized to large firms with the necessary technical staff to handle the technology, she added.
According to the Gartner Group's Terry Wright: "Companies will increasingly look to converge voice and data networks. However, it won't happen quickly, it's a slow migration."
To provide these integrated systems, vendors will have to form partnerships, he said, because "no single vendor can provide the hardware, software and services required to implement a converged system".
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