BEAVERTON, Ore. The year-long consolidation of the once highly-touted softswitch market continued on several fronts this week, as Oresis Communications Inc. laid off most of its workers, leaving 15 executives to search for a buyer. In addition, NexVerse Networks Inc. agreed to a merger with ECI-NGTS Ltd. to form a new company, Chorale Networks Inc., that will make another go at the packet telephony market.
The notion that software-programmable switches could mediate between Internet Protocol (IP) or ATM packet services and voice-oriented circuit services was so much in vogue four years ago that more than 15 startups pursued the so-called softswitch market. The collapse of the alternative telecom industry tripped up the move to an all-IP network and many softswitch equipment providers foundered. Sonus Networks Inc. and CopperCom Inc. are virtually the only survivors that Chorale Networks may face in the market. Convergent Networks Inc. retains a specialized foothold in Class 4 tandem-switch offloads, but is not seen replacing Class 5 circuit switches.
Investors once held great hopes for Oresis, which offered an ATM-centric switch. But Oresis had burned through almost $100 million in venture funding by late 2001. This week Oresis closed its offices in Colorado Springs, Colo. and laid off close to 200 workers in Oregon, leaving only 15 executives in Beaverton.
Meanwhile, CopperCom has shifted all its business to Boca Raton, Fla., home of a smaller softswitch company it acquired, DTI Systems Inc. CopperCom's operations in San Jose, Calif., focused on voice-over-DSL gateways, have been wound down to a small sales operation as the company's focus has shifted to DTI's Class 5 replacement switch.
The merger with ECI-NGTS will put NexVerse through its second rebirth in less than a year's time. The company was formed late last year after a group of investors bought product rights from IPVerse Inc., which was bankrupt. Renamed NexVerse, the company said it would seek strategic partners to improve its viability. The second makeover began Thursday (Oct. 31), when ECI-NGTS' parent, ECI Telecom, said it would invest $10 million into Chorale Networks, while NexVerse's investors agreed to ante up $14 million. As part of the deal, ECI-NGTS will transfer all assets related to voice-over-IP to Chorale, and all rights to the ECI media gateway. Chorale is still seeking an additional $6 million in financing.
Chorale Networks will be based in San Jose, Calif. A development operation will remain in Petah Tikva, Israel, where ECI-NGTS is based, and will focus on media gateway products.
Amit Chawla, the chief executive officer of NexVerse who will become vice president of marketing at Chorale Networks, said that discussions between ECI and NexVerse began when both companies realized they needed additional traction to move into international accounts, particularly in light of "the very real backlash against startups at many carriers in the last year." Discussions originally focused on possible joint product marketing, and later shifted to discussion of a joint venture.
ECI had a customer base in more than 140 countries for its DCME product line, so Chorale will begin with an existing revenue stream and distribution channel, Chawla said. Chorale will focus primarily on multinational PTTs and emerging in-country carriers in Asia during its first few quarters, though it anticipates a recovery of North American markets within a year or so, he said.