Allot Communications (ALLT) announced that it has reached an agreement to purchase La Jolla, Calif.-based Ortiva Wireless for an undisclosed amount.
With mobile video expected to comprise anywhere from 41% to 67% of telecom network traffic by 2015, Ortiva, a mobile video optimization specialist, supplements Allot’s Service Gateway platform in order to address what has rapidly become a fundamental network requirement.
Daryl Schoolar, Principal Analyst at Ovum said, “Simply, I think it is Allot recognizing that for it to remain successful in network optimization the company has to be strong in the handling of video. What Allot currently had in that area was not totally adequate and Ortiva fits an important need.”
While the move now puts Allot in direct competition with a wider array of players, including, established video optimization companies such as Bytemobile, Vantrix and others, it is a move that the Israeli vendor felt essential.
Speaking to RCR Wireless News, Allot’s director of marketing, Jonathan Gordon, commented that the vendor has recently noticed an uptick in the number of integration deals that the company had to do with mobile video optimization companies. “Adding video makes sense right now. It is already a big part of what we deal with. We’ve done a number of video optimization deployments, and it is a big focus for our customers.”
Ron Westfall, research director at Current Analysis, believes that this is a compelling acquisition for Allot because it helps the company enhance its adaptive streaming capabilities at a time when standards are beginning to simplify the approach that technology suppliers are taking. “The acquisition comes at a time when the MPEG-DASH standard should streamline the approach that vendors take with respect to adaptive streaming to mobile devices.”
Finally, while the terms of the deal were not disclosed, Westfall believes that the companies are a good financial match “Looking at what was indicated in the release, the revenue contribution margins that Ortiva brings ring true.”
Deal SWOT
Strengths:
–Deployment flexibility: Allot indicated that the Ortiva technology will be integrated into its Service Gateway platform, or can be deployed on a standalone basis.
–Allot is a profitable company, and Ortiva showed a net operating profit in 2011. As such the Allot should have the resources at its disposal to properly integrate the Ortiva solution into its portfolio without siphoning resources from other key development areas
Weaknesses:
–Per Allot’s 2011 annual report, the company’s Service Gateway platform comprises a small portion of overall company revenue. So, while the Ortiva acquisition should strengthen Allot’s overall value proposition in support of its Service Gateway, the fact remains that Allot is not a well-established player in the field that it is now addressing more directly.
–Allot does not have a long history of successfully integrating acquisitions. Additionally, the physical distance between the two companies – Allot in Israel and Ortiva in California – should make the task of integrating the two companies a challenge.
Threats:
–Both Allot and Ortiva are small companies that will be competing against giants in their respective fields. Beyond large systems vendors such as Cisco, Ericsson and others that have made mobile video a priority, well entrenched specialists such as Bytemobile and Vantrix can already lay claim to some of the integration efficiencies that Allot will be claiming with Ortiva in its fold.
Opportunities:
–While both companies are small, each claims tier-one operator customers. This should create cross-selling opportunities in accounts that, in theory, should provide good growth potential.
–Acquiring Ortiva at a time when the MPEG-DASH standard is beginning to gather steam – in some circles – should reduce an adoption barrier for mobile video optimization solutions in general.
