Intel Corp is paying $780m cash – or $44 a share – to acquire CTI computer telephony integration company, Dialogic Corp. It says that the convergence of voice, data and cable provides it with an unmissable opportunity to oust incumbent equipment suppliers. Intel is adding the software interfaces and hardware expertise the converged industries, especially the big-spending telcos will need as fast as it can and approached Dialogic with an offer it couldn’t refuse.
But why sell now? Dialogic is market leader in the computer- telephony space, does the vast majority of its revenue on Intel platforms and analysts estimate it will easily outstrip its own growth expectations of 25% next year. CEO Howard Bubb – who will become an Intel VP and president of a Dialogic division within the chip-giant’s enterprise server group – says the market trend is clearly consolidation and that he wants Dialogic to be able to continue to to lead and shape [the convergence market] and not just react.
The combination of Intel servers and Dialogic software will enable Intel to grow its SHV server business – Dialogic is owned by John Miner’s enterprise server group – and also provides an opportunity to offer what will effectively be CTI-on-Intel silicon solutions, though neither company would comment specifically on plans. Intel says it will develop server-based systems that put Dialogic on steroids to target telcos. With market researchers predicting that anything up to 70% of future server sales will to be in the services and outsourced application market, Intel is keen to build out so called white box servers for multiple applications and industries. Intel expects that Dialogic will drive its enterprise hardware business as well as driving Intel processors further into the network.
Bubb expects the pace of convergence to pick up if and when there is a movement to create more standardized software in the telecoms market. Standardized software has been key to the growth enjoyed by the enterprise and commercial computer vendors, he says. Dialogic’s business is split fairly evenly between telco and enterprise product sales, Bubb says.
Dialogic offers all-software, hybrid DSP board and software, and all-hardware solutions for voice, fax, data, voice recognition, speech synthesis and call center management applications. It derives only around 5% of its revenue from IP telephony products at present, but expects that within two years IP telephony services will be standard, bundled features of its products. Its biggest customer represents less than 3% of sales – the top ten make up 22%.
It has previously claimed CTI products built from Dialogic products manage more than one third of all telephone, fax, and multimedia calls answered by a computer. Dialogic will maintain its close links with Microsoft. Redmond recently took a 5% stake in Dialogic to cement a license deal for u sing the Parsipanny, New Jersey-based company’s CT Media server software for NT. All Dialogic employees are expected to be retained. Intel will record a one-time charge for in-process R&D and a small amortization charge. Dialogic shares jumped over 30% or $10.62 to close at $43.43 on news of the acquisition.
