Sipura’s CEO Strikes Gold – Again

Company's acquisition by Cisco marks the second time serial entrepeneur and Sipura founder Jan Fandrianto has sold a leading edge VoIP company to the networking giant. The first, in 2000, led to the creation of the VoIP consumer market. Some believe the latest merger is what may make VoIP a mass-market staple.

Cisco Systems announcement that it's buying privately-held Sipura Technology Inc. for its Linksys division shouldn't be too surprising. This is the second company serial entrepreneur Jan Fandrianto has sold to the networking giant.

His previous start-up company, Komodo Technology, which developed the first low cost VoIP analog telephone adaptor, was acquired by Cisco in 2000. Fandrianto's technology became the basis of Cisco's ATA-186 product line, which became the de-facto standard for VoIP equipment and is largely credited as the single device that helped propel IP telephony in the consumer sphere.

Fandrianto's industry roots go even deeper in the VoIP business. He was also CTO and VP of Engineering at ITT, Inc, the forerunner of today's Packet8.

After the Komodo acquisition, Fandrianto worked at Cisco with Malachy Moynihan, Linksys Vice President of Engineering/Product Marketing, who says of the Sipura acquisition that “bringing Jan in, for me, was a very easy decision.”

Cisco will pay about $68 million in cash and options for San Jose CA-based Sipura, which was founded in 2003 and describes itself as “the leader in VoIP CPE technology for mass deployment.” Subject to regulatory approvals, the deal is expected to close in July.

The two companies have had a close relationship even before Tuesday's announcement.

Sipura's technology is used by Linksys in its current line of ATAs and wired and wireless routers with phone ports. Linksys will continue to work with Sipura's service provider customers, according to Cisco's April 26 press release, as well as leveraging its traditional retail channels to reach consumers and SOHO environments with Sipura's line of VoIP products.

The acquisition — Linksys' first — is evidence of Linksys' strategy of increasing Research & Developement capabilities in specific areas.

“It's a significant increase in the in-house development resources we have in voice technology,” said Moynihan. “We see voice as growing very significantly in the cable and DSL markets as well as in the intersection with the IM community.”

Linksys' R&D team currently numbers about 30 people, to which Sipura will add its staff of about 10.

Long-term Linksys plans are to merge the two product lines under the Linksys label but, in the short term, both product lines will continue to be sold, according to Moynihan. He anticipates that full product integration may take as long as 12 months to complete.

“Today they're being sold to different customers,” he says. “Over time we'll figure out how to migrate but in the short term we don't want to disrupt customers.”

Consumers who prefer to purchase VoIP hardware devices separate from the service are likely to be affected by the deal. Sipura devices have been very popular among the do-it-yourself crowd, a group that has made up a significant share of the customers of the Voxilla Store, the retail arm of Voxilla, Inc., which also operates The Voxilla Store was the first retail operation to make Sipura gear directly available to consumers, and the company is a primary distributor of Sipura devices to VoIP service providers around the world.

“Voxilla has enjoyed a close working relationship with Sipura from the outset and we'll continue to work with the Sipura product line and support their devices,” said Lon Lazar, Vice President of Sales for Voxilla, Inc. “We are also excited about the possibilities that should stem from being able to offer and support Linksys and Cisco products in our distribution channel.”

The acquisition will make all of Sipura's products available to Linksys customers, which is good news for service providers like Vonage, who offer the Linksys product line. About 60 percent of Vonage customers use Cisco equipment, according to Brooke Schulz, Vonage Senior Vice President of Corporate Communications.

“It may give us more of a device range now that Sipura is part of the Linksys portfolio,” Schulz says.

Sipura is counting on that marketing leverage to promote the company's technology in a fast-moving marketplace.

“Linksys brings together what the market and customers need,” says Sipura's VP of Marketing Sherman Scholten. “This is a company that's very well-versed in what it takes to survive in a very competitive market.”

“VoIP is not a niche technology anymore and it's not an enterprise-centric technology,” Scholten continues. “It's a mass market product. You need to have standards-based equipment, you need interoperability with network equipment, and you need a product that's highly available.”

“Cisco's made some smart acquisitions, which this certainly is,” says BroadVoice CEO David Epstein. “One of the challenges will be to maintain the pace of innovation and quality.”

Sipura is one of BroadVoice's primary device partners, but not the only device supported by the Lowell, MA-based service provider. The company also supports about 200 SIP devices and firmware combinations, according to Epstein.

Today SIP is widely acknowledged as the standard for IP telephony, but that wasn't the case when Sipura set out to develop its first products.

“We based all our products on the SIP standard,” says Sipura's Scholten, “A year ago that wasn't necessarily a slam dunk — there were a lot of standards in use. But you could see SIP gaining momentum.”

Sipura's entry into the market was instrumental in maintaining that momentum, according to Scholten. A short 18 months separates the company's first product — the SPA 2000 — from its newest — the SPA 841, an IP telephone with two- and four-line configurations. “Today you could argue that Sipura has become the de-facto standard for low-cost SIP endpoints.”

But the market has become more competitive with a number of strong contenders. “Sipura has been one of the best,” says BroadVoice's Epstein, “but as SIP matures and the devices mature, there are new options.”

“This business has been an entrepreneur-driven, highly innovative category,” says Epstein. “As deals like this happen, the fear is that the pace of innovation — which is overall good — will slow.”

VoicePulse CEO Ravi Sakaria, whose company was the the first service provider to incorporate Sipura equipment, believes the merger can lead to greater innovation..

“I think that now Sipura can focus on engineering and innovation which they've always been good at,” Sakaria said. “Some of the obstacles have been logistics and manufacturing. Cisco and Linksys have established processes for that. They have a mature infrastructure.”

Epstein does see a bright side to the merger: that VoIP has hit the big time. “It's a good sign to the size and opportunity in the market.”