FierceVoIP

Radvision bests Q4 expectations; issues poor Q1 guidance

Jim O'Neill — Wed, 08 Feb 2012 09:36:01 -0500

Telepresence vendor Radvision (Nasdaq: RVSN), which earlier this year upped its fourth quarter guidance, today reported strong revenue and profit numbers that beat analyst estimates.

The company reported revenues of $21.8 million for the quarter, down 18 percent from the $26.6 million it reported in the year-ago quarter, but in-line with the $21.5 million to $22 million it anticipated. Earnings per share meanwhile, beat estimates by 15 percent. The company expected a loss of between 25-28 cents per diluted share on a GAAP basis, and 18-21 cents per diluted share on a non-GAAP basis, but reported a net loss for the quarter of $4.5 million, or 24 cents per diluted share, on a GAAP basis, and $3.1 million, or 17 cents per diluted share, on a non-GAAP basis. This compares with net income of $1.4 million, or 7 cents per diluted share, on a GAAP basis, and $2.9 million, or 16 cents per diluted share, on non-GAAP basis, a year ago.

The company closed the quarter looking for a bump in revenue from increased endpoint sales, and it got what it expected.

Chief executive Boaz Raviv said the sales were up 55 percent sequentially, and were "the main driver behind the better than expected performance of our Video Business Unit, and of our fourth quarter results overall."

He said video infrastructure products sales were up 25 percent sequentially, with sales to service providers--a target for the company--nearly doubling. "The strength of our technology and the broadening of our portfolio of solutions for the SMB market contributed to our record endpoint sales and success with Service Providers in the fourth quarter," he said.

The company this month also introduced its next-gen video system for the high end market, the Scopia XT5000, an endpoint it thinks will have a big impact on the SMB market, which Raviv said was "a significant step forward in our end-to-end strategy and it is key to our return to profitability and future growth."

Nonetheless, Radvision's outlook for the current quarter was anything but upbeat. It said it expects first quarter revenues of $17 million and a net loss of approximately $7.6 million, or 41 cents per diluted share, on a GAAP basis, and $6.8 million, or 37 cents per diluted share, on a non-GAAP basis. Wall Street was looking for revenues of $19.35 million and a net loss of about 24 cents per diluted share.

The Israeli company, which formerly was a supplier for Cisco's (Nasdaq: CSCO) telepresence offering, has struggled to regain its footing since Cisco bought Tandberg in 2009. It also faces stiff competition from Polycom (Nasdaq: PLCM).

For more:
- see this release

Special Report: Enterprise Communications earnings in the fourth quarter 2011

Verizon, BT expand telepresence offering with inter-carrier deal

Jim O'Neill — Wed, 08 Feb 2012 08:18:39 -0500

In what's becoming a fast-moving trend, yet another pair of telcos have announced their telepresence offerings will be able to interconnect. Verizon (NYSE: VZ) and BT today said they're extending the range of their telepresence products to communicate with each other via Cisco (Nasdaq: CSCO) TelePresence.

That means more customers using either service will be able to videoconference and collaborate using their respective immersive facilities. The deal essentially expands the telepresence community, helps clients collaborate globally and improves productivity.

It also helps ensure Cisco's place at the top of the telepresence sector.

"This initiative between BT and Verizon opens up new opportunities for enterprises to collaborate across their premium video platforms and will help multinational customers make the most of their Cisco TelePresence System investments," said Sandra O'Boyle, service director of business network and IT services at Current Analysis.

The deal helps streamline the infrastructure between the two telcos, creating similar scheduling, support, security and encryption mechanisms.

Customers will have access to a directory to determine which organizations are registered and are available for inter-carrier telepresence meetings, and where the sites are located.

Earlier this month, AT&T (NYSE: T) and Orange Business Services announced their own inter-provider connectivity agreement.

Tata Communications, late last month, said it would team up with nine other service providers-- including Sprint (NYSE: S), Glowpoint (OTC BB: GLOW.OB) and TELUS (Toronto: T.TO) in North America, Safaricom in Africa, Telstra (ASX: TLS.AX) in Australia, Etisalat, Qtel and Mobily in the Middle East, and Neotel in South Africa-- to interconnect their business networks.

Andrew W. Davis, senior partner and co-founder of Wainhouse Research, called the Tata deal "a major step forward for the video conferencing industry and its customers."

"By making B2B calls easier and by interconnecting different carriers, the Global Meeting Alliance will drive the usage of videoconferencing and Telepresence systems, enabling customers to see faster and higher returns on their investments," he said. "With its history of wholesale network services, intercarrier experience, and public room support, Tata Communications is in a unique position to launch this alliance."

For more:
- see this release

SIP Forum looks to accelerate interoperability of SIP trunking specs

Jim O'Neill — Mon, 06 Feb 2012 11:14:09 -0500

A recent study said that while SIP trunking has seen steady adoption over the past five years, interoperability issues and a lack of standardization have limited its overall adoption and hamstrung service providers from gaining deeper market penetration.

But a new technical initiative from the SIP Forum--SIPconnect-IT--aims to speed up vendor and service provider interoperability with the SIPconnect 1.1 Technical Specification, ratified by the SIP Forum earlier this year.

A series of testing events will help provide application developers, equipment vendors and operators with a platform from which to demonstrate and test implementations of the specification in real-world scenarios.

The first SIPconnect-IT testing event is planned for mid-2012 in Louisville, Colo., and will be hosted by CableLabs.

The ratification of the SIPconnect 1.1 technical recommendation earlier this year was seen as a significant step toward the adoption of a common interoperability specification between SIP-enabled IP-PBXs and service provider networks. It provides a framework for direct IP peering between SIP-enabled enterprises and service provider networks, ensuring the interoperability of network elements across the IP environment and providing best-practices guidelines for vendors and service providers as they develop new equipment and IP applications for deployment.

"SIPconnect-IT represents the next step and is designed to transform these specs into action and to ensure IP applications and infrastructure utilizing the SIPconnect 1.1 guidelines can be implemented in live telecom environments," said Marc Robins, SIP Forum president and managing director.

For more:
- see this release

Cisco looking for a strong quarter as rivals struggle

Jim O'Neill — Mon, 06 Feb 2012 10:52:11 -0500

Despite sluggish capex spending globally by service providers, Cisco is expected to report strong results Wednesday after the bell when it unveils its second fiscal quarter numbers; that could be more bad news for rivals like Juniper Networks, which last month reported a weak fourth quarter and came up short of analyst expectations for the future, causing its stock to slide. Cisco, on the other hand, is likely to continue the rebound CEO John Chambers has engineered over the past two quarters, with gains in both sales and profit. The bigger issue, of course, will be: Can the networking giant continue to grow as telcos pull back on their spending? Article

Nicira looks to disrupt networking space with A-list client roster

Jim O'Neill — Mon, 06 Feb 2012 10:39:09 -0500

Nicira, a network virtualization startup with more than $50 million in venture funding from the likes of Andreessen Horowitz, Lightspeed Venture Partners and NEA, as well as VMware founder Diane Greene and venture capitalist Andy Rachleff, emerged from stealth mode today with an A-list of customers including AT&T (NYSE: T), eBay, Fidelity Investments, Rackspace and NTT.

The company said its Network Virtualization Platform technology was task-built for cloud networking. It allows owners of multiple networks, like AT&T, to get extra capacity when it's needed without having to make huge capex investments. The software-based system creates a distributed virtual network infrastructure in cloud data centers that is completely decoupled and independent from physical network hardware, essentially expanding the pipe through which data travels.

Nicira said NVP is a scalable software system implemented at the network edge and managed by distributed clustered controller architecture. It forms a thin software layer that treats the physical network as an IP backplane, allowing the creation of virtual networks that have the same properties and services as physical networks.

"All of the intelligence, all of the control, all of the services now get done in the virtual space," chief executive Stephen Mullaney told AllThingsDigital.

The technology potentially alters the network landscape, landscape currently occupied by companies like Cisco (Nasdaq: CSCO) and Juniper Networks (NYSE: JNPR), dramatically, specifically because it eliminates the need for service providers and companies like eBay and Rackspace, to continually build out their own networks. Less build out means more troubles for companies selling hardware.

Commercially available since July, NVP is built on a usage-based, subscription-pricing model.

For more:
- see this release
- see this AllThingsDigital article

Booming data market to spur tech M&A frenzy in 2012

Jim O'Neill — Mon, 06 Feb 2012 09:38:27 -0500

Bloomberg this morning reported that experts expect 2012 merger and acquisition activity in the tech industry to likely surpass that of 2011, which saw nearly $200 billion in deals, the most since 2007.

Last year's big deals, led by HP (NYSE: HPQ) acquiring Autonomy for $10.3 billion, Google (Nasdaq: GOOG) buying Motorola Mobility (NYSE: MMI) for $12.5 billion and Microsoft (Nasdaq: MSFT) purchasing Skype for $8.5 billion generated a lot of headlines, but Bloomberg says this year, for a coupe of reasons, shapes up as even more interesting.

First, expect the creation of a flood of data-enough to fill Apple (Nasdaq: AAPL)'s 2.7 billion iMacs to capacity, about 8 zetabytes, by 2015, based on Cisco's (Nasdaq: CSCO) Global Cloud whitepaper and another report from research firm IDC.

Cisco in November said it expects that some 57 percent of all workloads will be processed in the cloud by 2014, and expects total data center data flow will be close to 5 zetabytes by 2015, and that data center IP traffic will reach 402 exabytes per month. Global data center IP traffic, it wrote, will increase fourfold over the next five years, with data center IP traffic will growing at a compound annual growth rate of 33 percent from 2010 to 2015.

How to manage that data, access and use it and store it, is going to get M&A activity popping. While companies will continue to do in-house research and product develiopment, the reality is that they can move forward more aggressively by acquiring the technology that fits their needs, saving them time and money in the long run.

ShoreTel's acquisition last week of M5 Networks (see ShoreTel acquires M5 Networks for $160M as it looks to develop cloud business) is an example of exactly that. The $160 million price tag brings ShoreTel the near-instant ability to add cloud solutions to its repertoire, bringing in new customers--M5 has some 2,000 clients of its own at the time of the deal--and new markets.

"For us to build this expertise would have taken time and investment and would certainly have involved distraction and therefore risk to our current business," said ShoreTel CEO Peter Blackmore. "We therefore determined the best way to enter this market quickly and establish a strong position is to find a company with a proven business model, a significant recurring revenue stream, a good management team and then bringing that organization into ShoreTel as a new business unit."

Privately held M5 itself made a pair of major acquisitions recently, in April buying contact center software vendor Callfinity, and in November 2010 buying hosted VoIP provider Geckotech.

"The speed at which technology innovation moves is such that you can't miss a step," Jon Woodruff, the San Francisco-based co-head of technology investment banking at Goldman Sachs Group Inc., the industry's top adviser on deals last year, told Bloomberg. "Every tool has to be used for speed and nimbleness sake, and M&A is one of those significant tools."

The second major factor in M&A, obviously, is credit availability and cash on hand. Both seem to be in adequate supply, with many companies now looking at the hoard of cash they stockpiled during the past couple of year's uncertain economic conditions.

Bloomberg estimated corporate cash levels are up 21 percent to $513 billion this year, according to the Morgan Stanley Technology Index.

Cisco, for example, has some $44.4 billion in cash on hand and has been actively buying companies for their technology (some 150 so far) in recent years. HP has just over $8 billion, although chief executive Meg Whitman said that while it's not looking for any major deals, it's open to acquisition.

Google, with $44.6 billion on hand, is likely to continue the dozen-plus-a year acquisitions it makes, while cash-hoarding Microsoft, with $51 billion, also is expected to play more aggressively in the cloud.

Apple traditionally hasn't been a big player in corporate sales, so expecting it to dabble in M&A with an eye toward a bigger piece of the cloud might be counterintuitive. But with its iPad making huge inroads in business, and its already substantial investment in the consumer cloud with its iCloud play, perhaps it's not such a stretch any more. And, it's got a whopping $97.6 billion on hand.

As more cash has been accumulated, the values of a number of potential acquisition targets have declined.

Acme Packet's (Nasdaq: APKT) slide in the market last week (see Acme Packet tumbles as Q4 falls short of expectations), exacerbated its woes; it has lost a third of its market value since October... and it's the leading enterprise SBC vendor in the space. You can add companies like F5 Networks, Juniper Networks (NYSE: JNPR) and several others to the list of firms that have seen huge chunks of valuation fall away, making them appealing targets.

Cisco releases its earnings Wednesday. If it has a strong enough showing, as it's expected to, perhaps we'll see the company kick off some new M&A activity.--Jim

Snom extends IP PBX capabilities to mobile devices with snom One

Jim O'Neill — Sun, 05 Feb 2012 15:28:24 -0500

With worker mobility becoming a mushrooming problem to deal with for more companies, IP desktop phone provider snom technology is looking to make it easier to provision a business' cell phone fleet.

The company has launched One IP PBX, adding mobility capabilities that extend standard IP PBX calling features to employee's mobile devices, and introducing new management and security features. One IP PBX enables users to integrate mobile phones into an organization's internal telephony platform, which, snom said, should help make the mobile workforce more producticve.

Snom One IP PBX allows cell phones to act as integrated extensions, incorporating call transfers, conferencing, internal extension dialing and other features. It also now supports mobile SIP clients and has had its web-based interface enhanced to make administering the system easier.

The snom One is optimized for all snom phones and provides WAN-based authentication for plug and play with snom 7xx and snom 8xx series phones. It's available as virtual appliances for VMware and Microsoft Hyper-V via a .vhd file, and can be updated via the web interface.

The snom One is compatible with Windows, Linux and Mac environments and is equipped with web security through HTTPS and call security through TLS and SRTP. snom ONE supports mixed IPv4/IPv6 LAN and WAN environments and comes with an automatic blacklisting feature that makes it possible to expose public IP addresses.

For more:
- see this release

Aculab rolls out managed cloud-based telephony service

Jim O'Neill — Sun, 05 Feb 2012 14:47:57 -0500

U.K. IP telephony hardware and software vendor Aculab has rolled out Aculab Cloud, which it says is a scalable on-demand platform-as-a-service that brings together software traditionally loaded onto voice boards or available to download onto host processors.

Aculab said the telephony platform reduces management costs, and allows companies to scale in the cloud as needed without additional hardware costs, reducing capex.

Aculab Cloud comes with a set of high level telephony APIs, making it easier for developers to build telephony applications quickly, the company said. Included in the service are features like:

International inbound PSTN service and outbound PSTN service;
Play, record;
TTS, conferencing (for up to 400 parties);
Transfer, DTMF, CPA, live speaker detection, answer machine detection and many more essential features for building a diverse range of solutions.

Aculab has beta tested the solution with several high-volume customers, running some 3 million minutes (and growing) through the platform in January, it said.

For more:
- see this release

Extreme Networks: Cloud focus will keep earnings on track for year

Jim O'Neill — Thu, 02 Feb 2012 18:47:31 -0500

Extreme Networks (Nasdaq: EXTR) missed its second quarter earnings mark, reporting EPS of 6 cents on revenue of $82.8 million, down from $85.1 million a year ago; analysts had expected the company to earn 7 cents per share on revenue of $83.49 million.

But, the network infrastructure vendor stood behind its full-year guidance, and said it expects third quarter earnings to be $80 million to $85 million, or 6-8 cents a share, shy of Wall Street's expected $83.14 million and 8 cents per share. Shares were up in after hours trading.

"These results show the initial positive effect of our company transformation with product revenue up 8 percent and non-GAAP operating income up 25 percent from Q1," said chief executive Oscar Rodriguez. "We are now focused on driving the success of our new products for the cloud, data center and mobile markets, which will begin shipping this quarter."

Rodriguez said the company had seen strong interest in new cloud-scale products including the Black Diamond X8 and its new mobile backhaul products, the E4G cell-site routers.

Total net revenue for the Americas was $36.8 million, revenue in EMEA was $32.4 million and revenue in APAC was $13.6 million. That compares to revenue in the Americas of $30.8 million, revenue in EMEA of $37.2 million and revenue in APAC of $17.1 million for the same period last year.

Earlier this year, the company announced the general release of its newest Ethernet switch, the BlackDiamond X8, which it said was the "industry's highest density 40 GbE and 10 GbE switch for enterprise core and cloud-based data centers." The company said it expects to begin shipping the product in February.

For more:
- see this release

Special Report: Enterprise Communications earnings in the fourth quarter 2011

Acme Packet tumbles as Q4 falls short of expectations

Jim O'Neill — Thu, 02 Feb 2012 18:22:14 -0500

After four straight quarters of earnings bonuses for investors, Acme Packet (Nasdaq: APKT) laid its second profit egg in a row today, reporting fourth quarter non-GAAP EPS of 26 cents, missing Wall Street expectations by 2 cents and falling 40 percent off its earnings a year ago. The market reacted quickly, dropping the company's share price by 10 percent in after hours trading.

The company said rising costs and a soft market in North America, where service providers were reining in capex, were to blame.

Those conditions are likely to persist, said CEO Andy Ory, during an earnings call in which he predicted more woe in the year ahead, growth of just 10 percent compared to Wall Street estimates of nearly double that. The company sad it expects full-year profits of 96 cents to $1 a share, below the $1.24 expected by analysts.

"This reflects a slowdown in capex in the second half of the year and delays caused by consolidation activities among various service providers," Ory said. "We don't expect the North American capex environment to improve in the first half."

Acme reported $83 million in revenue for the quarter, missing expectations of $85.2 million. Total revenue in 2011 was $307.3 million, an increase of 33 percent compared to $231.2 million in 2010.

In January, Acme Packet's share price tumbled some 20 percent after the company downgraded guidance for the year, blaming a turbulent service provider market in North America then, too.

"Outside of the North American service provider market, Acme Packet continued to perform very well--particularly in our enterprise business as well as in our Europe and Latin America businesses," Ory said at the time. Unlike today, however, Ory took a positive note on the future, saying:"Looking ahead, we believe we are very well positioned to leverage the broad, multi-year, secular growth drivers associated with the global transition from TDM to IP for real time communications like voice and video."

The enterprise session border controller (SBC) market was busy earlier in 2011, seeing a 55 percent jump in the first quarter. Hosted unified communications and SIP trunking were among factors that played a role in the growth. As in the service provider SBC segment, Acme Packet is the lead dog in the enterprise market, with Cisco Systems (Nasdaq: CSCO) in second place, followed by Ingate and Sipera.

The enterprise SBC market, however, remains fragmented below that top tier, which means declining prices may loom.

For more:
- see this release
- see this Reuters article

Special Report: Enterprise Communications earnings in the fourth quarter 2011

RTX launches new cordless Skype phone

Jim O'Neill — Thu, 02 Feb 2012 10:54:28 -0500

RTX is rolling out a new cordless Skype phone that doesn't require a user to be physically connected to a PC to make a VoIP call.

The DUALphone 4088 simply requires a broadband connection to its base station in order to make Skype calls.

The Danish company said its DUALphone 4088 simply requires a broadband connection to its base station in order to make Skype calls free of charge to other Skype users or have the choice of conventional paid-for landline calls worldwide.

The company's CEO, Jesper Mailind, said the phone "offers consumers a unique way to use Skype."

"We believe there is a growing demand for dual phones from the existing 170 million Skype account holders," he said, adding that the phone also will provide a business opportunity for resellers.

Telecom market research firm TeleGeography recently said international use of Skype was increasing, growing 48 percent in 2011, to 145 billion minutes.

The RTX features a color TFT screen and uses of high definition audio. The phone system can switch between two separate Skype accounts and can be extended to four handsets per household. Standard features including call waiting, voicemail and a phone contact list of 200 numbers that have been enhanced by software to show the Skype status of the user and all contacts.

For more:
- see this release

LifeSize debuts 'universal' video collaboration platform

Jim O'Neill — Thu, 02 Feb 2012 10:31:59 -0500

Logitech (Nasdaq: LOGI) subsidiary LifeSize this week launched its LifeSize UVC Platform, which the company says is the industry's first integrated and virtualized software solution for HD video conferencing infrastructure.

The UVC (universal visual collaboration) platform integrates the capabilities of multiple single-purpose infrastructure products and makes them instantly available from one interface with one login account.

The company said the UVC platform is scalable and customizable, and includes infrastructure applications like HD streaming and recording, firewall/NAT traversal and Gatekeepers (routing and control).

LifeSize contends that with a single integrated platform and a deployment model to fit every IT environment, administrators can buy what they need now and scale up as the organization's needs grow.

"LifeSize has consistently delivered industry firsts," said Colin Buechler, who was named LifeSize's CEO earlier this month, "We were first to HD, first with one button streaming and recording, and now we are redefining video conferencing infrastructure... LifeSize has fundamentally changed the way businesses deploy infrastructure, unlocking the door to real adoption and growth in the video conferencing industry."

LifeSize is offering a "try before you buy" feature that enables instant downloads of the platform, which is globally available now.

The platform with infrastructure applications lists at $3,999; it currently includes UVC Video Center for streaming and recording; UVC Transit Server, a firewall/NAT traversal server; the UVC Transit Client, which is a firewall/NAT traversal proxy; and UVC Access, a gatekeeper/IP communications routing and control.

For more:
- see this release

Qualcomm, Ericsson perform successful VoIP-over-LTE handover

Jim O'Neill — Thu, 02 Feb 2012 10:00:18 -0500

Qualcomm and Ericsson completed the first voice call handover from an LTE mobile network to a WCDMA network using Single Radio Voice Call Continuity (SRVCC), the companies announced today.

SRVCC is a 3GPP specified feature that enables continuity of service by seamlessly switching to a WCDMA network when a consumer on a VoLTE call leaves the LTE network's coverage area; it's a technology required for voice-over-LTE (VoLTE) support.

The call was completed with an Ericsson network using a handset that incorporated Qualcomm's Snapdragon S4 MSM8960 3G/LTE multimode processor. Qualcomm is demonstrating the technology at its booth at Mobile World Congress in Barcelona, Spain later this month.

For more:
- see this release

ShoreTel tops analysts estimates in 2Q, ups revenue 22%

Jim O'Neill — Thu, 02 Feb 2012 08:46:12 -0500

ShoreTel generated record revenues in its second quarter for fiscal 2012, and surprised analysts by reporting earnings that beat their expectations by 400 percent.

The IP telephony company also announced it had acquired M5 Networks, a hosted VoIP and UC provider for $160 million (see ShoreTel acquires M5 Networks for $160M as it looks to develop cloud business).

Sunnyvale, Calif.-based ShoreTel said revenue grew 22 percent year-over-year to $58 million, and up 8 percent from the previous quarter. Non-GAAP net income was $1.4 million or 3 cents per share, compared with a non-GAAP net loss of $1 million, or 2 cents per share a year ago. Analysts had expected ShoreTel to report a 1 cent loss for the quarter; the second quarter is typically a seasonally strong one for the company.

During the company's earnings call, chief executive Peter Blackmore said the U.S. Enterprise IP telephony market as well as the U.S. pure IP telephony market grew in the September 2011 quarter after three quarters of modest declines. Synergy Research, he said, estimated the U.S. Enterprise IP telephony market was up 9 percent in the quarter and worldwide Enterprise IP telephony also grew approximately 8 percent.

"ShoreTel's market share within both worldwide and the United States have grown significantly year-over-year," Blackmore said. "We expect to build these market share gains and continue to close the gap between our current number three position and the number two player in the U.S."

ShoreTel said highlights for the quarter included an expansion of its channel. The company added some 60 new partners globally, 38 via its relationship with ScanSource. Blackmore pointed to the addition of Howard Industries, which has revenues in excess of $1 billion and is the largest employer in Mississippi; it selected ShoreTel as its exclusive UC provider.

"We also added a record of nearly 1300 new customers in the quarter, a sequential increase of 24 percent over quarter one," he said, singling out First Republic Bank, which will also use ShoreTel's UC solution including ShoreTel Mobility for 3,000 employees at 65 sites.

ShoreTel forecast revenue of $53 million to $57 million in the current quarter.

For more:
- see this release
- see this SeekingAlpha transcript

Special Report: Enterprise Communications earnings in the fourth quarter 2011

ShoreTel acquires M5 Networks for $160M as it looks to develop cloud business

Jim O'Neill — Thu, 02 Feb 2012 07:54:46 -0500

ShoreTel (Nasdaq: SHOR) has agreed to acquire M5 Networks in a deal valued as much as $160 million, giving it a major entrée to the booming cloud services business in the form of a strong hosted VoIP and UC operation.

M5 shareholders will receive approximately $84 million in cash and 9.5 million shares of ShoreTel stock, which equates to a total of $146.3 million in initial consideration based on a ShoreTel's average stock price over the prior 30 trading days. In addition, M5 shareholders may receive additional contingent consideration of up to $13.7 million. The contingent payments are payable over the two years after closing and are based upon the achievement of certain revenue performance milestones for the year ended Dec. 31, 2012. The deal is expected to close by the end of March.

Privately held M5, which was recently given a visionary position in Gartner's Magic Quadrant for UC as a service in North America, caters primarily to businesses of between 50 and 500 seats. It has more than 2,000 customers and more than 60,000 recurring revenue seats in the U.S.

M5 itself made a pair of major acquisitions recently, in April buying contact center software vendor Callfinity, and in November 2010 buying hosted VoIP provider Geckotech.

With forecasts pointing to continued growth in the hosted UC market, Gartner estimates the market to be $700 million today and expects it to grow at a 36 percent compounded annual growth rate to $2.2 billion in 2015; the deal could be very good to ShoreTel.

ShoreTel CEO Peter Blackmore, during the company's earnings call (see ShoreTel tops analysts estimates in 2Q, ups revenue 22%), said M5 brings a proven hosted UC solution to the company. And, he said, ShoreTel, after eight months of performing an extensive buy-versus-bill review "determined that the secret sauce in hosted UC is not just a well developed R&D solution, but more fundamentally experienced in running a very different business model."

Blackmore said M5 also was attractive because it brought with it a low churn rate, high average revenue per unit, competitive customer acquisition cost and expertise in running in 24/7 data centers.

"The management skills required to run a hosted business are in many ways different from those necessary for the on-premise business," he said. "For us to build this expertise would have taken time and investment and would certainly have involved distraction and therefore risk to our current business. We therefore determined the best way to enter this market quickly and establish a strong position is to find a company with a proven business model, a significant recurring revenue stream, a good management team and then bringing that organization into ShoreTel as a new business unit."

Blackmore also said ShoreTel plans no changes in its current distribution model.

On the nuts and bolts side:

ShoreTel is acquiring M5's entire operation including its customer base, distribution capability and proprietary network, and will be extending offers to substantially all of its 200 employees;
Following the close of the acquisition, M5 will be operated as a ShoreTel business unit;
M5 CEO Dan Hoffman will become president and general manager of the new business unit;
M5 engineering teams will remain separate, but they will cooperate and coordinate in order to leverage the innovation and best practices of both groups; and,
The current ShoreTel Champion Partner reseller program will evolve to include the ability to offer hosted services once the reseller has been qualified and certified.

For more:
- see this release
- see the earnings call transcript from SeekingAlpha