Netifice Looks for VOIP Deals

Netifice Communications Inc., which this week bought the SSL VPN services arm of Aventail Corp., is not done with acquisitions, according to Greg Davis, the company's vice president of marketing (see Aventail Sells Managed Services Division).

We have been looking at IP telephony and, in particular, at VOIP," he tells NDCF. ”I would say that, in the next 12 months or so, you might see another deal coming through."

Money should not be a problem for the Costa Mesa, Calif.-based vendor. Netifice raised $55 million in Series E funding this week from Columbia Capital, Boston Millennia Partners, Dolphin Equity Partners, H.I.G. Capital, Fidelity Ventures, and Rho Ventures. Davis, says that “a sizeable piece” of this cash was spent on acquiring the Aventail division, although he was unwilling to reveal the exact value of the deal.

Nonetheless, there should be plenty of loose change left over for another foray into the M&A market. Michael Suby, program manager at analyst firm Stratecast Partners, believes that a move into the VOIP space makes perfect sense. "If you're Netifice, or anyone else, you want to go beyond data networking to data and voice," he says. "You want to serve your customers' full communication requirements."

But the Aventail deal is all about gaining an edge in the SSL VPN market. Telecom and Web hosting firms such as NTT/Verio Inc. and Virtela Communications Inc. are increasingly looking to offer advanced, SSL VPN-based security services to their customers (see Verio Enhances VPN Services and Virtela Publishes VPN Case Study).However, as these firms look to exploit a growing need for SSL VPNs, so the services specialists they rely on are building out their own product portfolios.

Netifice, for example, manages networks among users’ data centers, corporate offices, and remote sites, as well as offering access to services in its own data centers in California and Atlanta.

The Aventail deal is a significant move by Netifice and highlights the growing demand for managed SSL VPN services. Prior to the acquisition, Netifice’s core technology offerings centered on IPSec and MPLS, and its customers were predominantly enterprise firms.

But Netifice has now inherited a slew of big-name Aventail customers, including AT&T Corp. (NYSE: T), MCI Inc. (Nasdaq: MCIP), Sprint Corp. (NYSE: FON), and Infonet Services Corp. (NYSE: IN).

Netifice has promised that there will be no layoffs following the deal, and it will continue to run Aventail’s SSL VPN managed services operation out of its existing site in Seattle.”I think that this certainly is a positive move for Netifice. What you have is a company that is seeking to be more of a one-stop-shop,” says Stratecast's Suby.

However, Netifice is not the only vendor playing in this space, and Davis cites MegaPath Networks and GoRemote Internet Communications Inc. as key competitors.

The next few months could be a busy time for these companies. Suby says that the managed services market is very much an emerging one, driven by the use of broadband for wide area networking and greater opportunities to outsource technology management. “I definitely see it growing,” he says.

Analyst firm Infonetics Research Inc. predicts that the combined market for managed VPNS and security will grow to $38 billion in 2008. IPSec may still be the dominant technology, but SSL VPN is gaining fast, according to Infonetics (see VPN, Security Services Grow).

— James Rogers, Site Editor, Next-Gen Data Center Forum0