Category Archives: VoIP

Avaya Must Avoid Distractions in Nortel Integration

If all goes according to plan, Avaya will take possession of insolvent Nortel’s enterprise assets, won at auction for approximately $900 million in September.

It’s at that point that Avaya will face some difficult decisions and daunting challenges. As it integrates and assimilates Nortel products and employees — not to mention its channel partners — Avaya will contend with multiple overlaps and redundancies. In most cases, those overlaps will be resolved in favor of products within Avaya’s portfolio. Nonetheless, as an article at Network World suggests, Nortel products might prevail in rare exceptions.

Avaya will have to decide whether it wishes to prolong the lives of Nortel’s switch and security portfolio. These are the products — minus Alteon load balancers, small-office/home-office gear, and blade switches, which now belong to Radware, Netgear, and Blade Network Technologies, respectively — that Nortel inherited when it acquired Bay Networks for $9.1 billion in 1998, back when the Internet seemed a limitless, gurgling fountain of obscene wealth.

There’s not much of Bay Networks left standing within Nortel. What remains really isn’t worth Avaya’s bother of keeping it alive. The cost to Avaya wouldn’t just be manifest in the bills associated with maintaining, supporting and extending the product portfolio. Additional “opportunity costs” would be incurred in the form of lost partnerships with vendors that sell networking products similar to those, but (in most cases) better than, the Nortel switches and security boxes. (Current Avaya enterprise-networking partners include HP ProCurve, Extreme Networks, and Brocade/Foundry.)

Besides, the Nortel switches would be a distraction, a once-shiny, now-irredeemably tarnished bouncy ball that Avaya executives would be remiss to chase. They’ll get some useful things from the Nortel acquisition, but the ex-Bay stuff isn’t among them.

Avaya would be wise to keep its eye on its core enterprise-communications business. Whether those communications involve VoIP alone, or unified communications, it will face tough competition from Cisco. Avaya has neither the scale nor the resources to compete with Cisco right across the enterprise board.

Accordingly, the company should strive to keep Cisco’s enterprise-networking enemies among its allies as it wades into battle.

Considerable Product Overlap in HP-3Com Combination

An article over at Network World written by Jim Duffy, who has been covering the computer-networking industry for many years, reinforces much of what I wrote previously about significant product overlap in the switching-product portfolios of HP and 3Com, which the former bought earlier this week for $2.7 billion.

HP is trying to downplay this aspect of the deal, but it is significant. HP is saying that because of the open, standards-based technologies on which the switch families are based, customers will have no trouble adopting whatever products avoid the chop in the post-merger integration. That’s true, I suppose, but the same logic does not apply to product developers and managers connected to the offerings that are not carried forward.

Regardless of whether individual HP or 3Com products survive, it’s reasonable to conclude that cost-cutting HP will be looking to do more of its development in China, where it gains access to 2,400 3Com networking engineers.

Two areas where HP gets new products from 3Com — and where no overlaps exist — are routing, both at the enterprise edge and the core, and core switching. As Duffy says, those are ingredients that will further the networking aspect of HP’s converged data-center strategy.

Other areas where HP gains new products are in intrusion prevention systems (IPS), where it now owns 3Com’s TippingPoint subsidiary, and in VoIP PBXes, where it gets an outdated 3Com product line with negligible market share. I really cannot envision HP eschewing its unified-communications partnership with Microsoft simply because now owns 3Com’s VoIP products.

Regarding TippIngPoint, it has an impressive installed base, and it represents a solid franchise.

In recent years, however, product quality has seemed to slide as some members of the original development team have left the company. I don’t think TippingPoint was a critical factor in HP’s decision to pursue 3Com, but HP needed to strengthen its security capabilities and this represents a first step in that direction.

Avaya’s Nortel Deal Clears Most Regulatory Hurdles

Avaya’s acquisition of Nortel’s enterprise business assets, won at auction in exchange for $915 million in cash, moved nearer to fruition this week by clearing some regulatory hurdles.

The one remaining major regulatory hurdle is a foreign-investment review that was initiated under the Investment Canada Act in late September by Tony Clement, Canada’s industry minister.

The review was automatically triggered because of the size of the deal. Under Canadian law, the government can review a sale to a foreign company if it considers the deal a threat to national security or if the transaction value exceeds C$312 million.

In the case of Avaya’s proposed acquisition of Nortel’s enterprise business, the deal is being reviewed strictly on a valuation basis. Although no status update has been provided regarding the review, many observers believe the likelihood of the sale being denied is low.

Avaya expects the transaction to close in December.

Nortel to Cut 56 Jobs in Texas with Approval of Avaya Deal Pending

In a move evidently connected to Avaya’s pending acquisition of its enterprise business, Nortel announced today that it would slash 56 jobs at its facility in Richardson, Texas, effective on or around Jan. 3, 2010.

The news arrived in a mandatory notification letter submitted to the Texas Workforce Commission, according to American City Business Journals.

Although Avaya’s acquisition of Nortel’s enterprise business is being reviewed by the Canadian government, recent scuttlebutt suggests the deal is likely to be approved.

In other Nortel news, the insolvent telecommunication-equipment vendor plans to delay filing its third-quarter results until as late as Nov. 16 because of changes to the way it reports data for some overseas subsidiaries.

Reviewing the Skype Deal

If the battle for Skype were a television series, it would have been equal parts soap opera and suspense thriller. It nearly segued into courtroom drama, but it wouldn’t have been a good one, likely way too one-sided for engrossing fare.

In the end, it was the specter of a courtroom rout that got the principals to the table to hammer out a settlement that leaves a few people happy, a few people content, and a few people disconsolate. There were winners, losers, and those who fall somewhere between those unambiguous extremes.

I think Om Malik has done an excellent job categorizing how the various players fared. His blunt assessment is keenly accurate, cutting through the cant and dishonest spin of those who would try to persuade us that we can trust neither our own lying eyes nor our critical faculties.

As far as the official breakdown, eBay finally gets to sell majority ownership of Skype to a consortium of investors, though the composition of those investors — and the overall percentage of the company they’ll take off eBay’s hands — has changed.

The key paragraph, excerpted from the press release announcing the settlement, is this one:

“As part of the settlement agreement, Joltid and Skype founders Niklas Zennström and Janus Friis will join the investor group, contributing Joltid software and making a significant capital investment in exchange for a 14 percent stake in Skype. As a result, Silver Lake and other investors including Andreessen Horowitz and the Canada Pension Plan Investment Board (CPPIB), will together hold 56 percent of Skype and eBay will retain 30 percent. As previously announced, eBay will receive approximately $1.9 billion in cash upon the completion of the sale and a note from the buyer in the principal amount of $125 million. The deal, which values Skype at $2.75 billion and is not subject to a financing condition, is expected to close in the fourth quarter of 2009.”

In the original ill-fated arrangement, announced September 1, eBay sought to sell 65 percent of Skype to a consortium of investors that was led by Silver Lake. That consortium included Index Ventures but excluded Skype’s founders, Zennstrom and Friis, who — by the time this story runs its course — will have been both sellers and buyers of Skype in separate transactions with eBay.

Like the doomed proposal that preceded it, today’s announced agreement values Skype at about $2.75 billion.

Index Ventures and Mike Volpi, a partner in that firm, are not part of the deal. Index would like us to believe that this arrangement occurred entirely of its own volition, but the evidence suggests otherwise. Here is what Danny Rimer, a partner at Index Ventures, had to say about the Skype settlement:

“We are pleased that Skype will now be able to put litigation behind it, and we wish Josh Silverman, his team and the Skype investors well in continuing to grow a great business. Although Skype has the potential to be a great investment, the deal terms changed for Index such that it no longer matches our investment criteria and thus we have decided not to participate in the transaction.”

Om Malik contends rightly that this is . . . er, poppycock.

I don’t know whether Index could have said anything to take the sting out of the loss it sustained, on multiple fronts, in this whole Skype imbroglio. Nonetheless, the quote Rimer provides is embarrassing and ungracious. There are times when it’s best to say nothing, and this qualified as one of them.

It’s all over but the shouting now. With 23 directors, Skype might want to soundproof the boardroom.

Skype Settlement Said to be Imminent

Although a settlement seems to be in place — with Skype founders Niklas Zennstrom and Janus Friis receiving a 10-percent equity stake in Skype, plus two board seats, and with Index Ventures and Mike Volpi getting banished from the deal — a formal announcement including all the pertinent details has yet to be delivered by the legal gods to us mere mortals.

It shouldn’t be long, though.

Network World Reprises Volpi’s Medley of Email Hits

For those who cannot get enough of the intrigue, scheming, and shenanigans surrounding the boardroom-to-courtroom-to-boardoom battle for the ownership of Skype, Brad Reese at Network World reproduces a medley of Michael Volpi’s greatest email hits.

Thrill to Volpi’s message about “getting the father of SIP to jump ship” from Cisco. Enjoy his follow-up message to Egon Durban, managing director at private-equity firm Silver Lake, regarding the need to fill out a SIP engineering team with five or six solid VoIP software engineers. Marvel at Volpi’s disparagement of former colleagues and Skype-deal confederates.

Moreover, consider that he was writing all these email hits while still employed as the CEO of a company (Joost) that was founded and run by the same duo, Niklas Zennstrom and Janus Friis, who founded Skype before selling it to eBay and who entertained hopes of owning it again. Also ponder that much of the same underlying p2p software used at Joost, at least originally, also served as the architectural foundation for Skype.

Finally, consider that Volpi was said to have led and been involved in an architectural transition at Joost that saw the video-sharing site move from the p2p foundations on which it was based — using the same Joltid technology that was licensed by Skype — to a client-server architecture that employed Flash-based web clients at the end points.

At minimum, there would appear to be superficial similarities between the architectural overhaul that had occurred at Joost and what Volpi proposed for Skype.

Reputation Bashing in Joltid-Volpi Brouhaha?

In a short piece summarizing and commenting on the latest developments pointing toward a settlement of the legal conflicts and ownership of Skype, All Things Digital’s Kara Swisher opines as follows:

Skype founders Niklas Zennström and Janus Friis had sued Index and also partner Michelangelo Volpi via tech companies they control, Joltid and Joost.

The pair had already been in a legal battle over software licensing issues with eBay (EBAY), the company that had sold Skype to in 2005.

They then accused Index and Volpi, employing a reputation-bashing style, of using confidential information as part of a consortium bid to acquire a large chunk of Skype.

Well, did Zennstrom and Friis use “a reputation-bashing style” in their litigious cage match with Mike Volpi? I suppose that’s one interpretation of what occurred, but it’s not the only one.

For the record, I read Volpi’s email correspondence, written while he was CEO of Joost, adumbrating his plan to take control of Skype and perhaps serve as chairman of that company. I am not a lawyer, and I am not crazy enough to pass legal judgment on what Volpi said and did while sitting in the big chair at Joost, but it seems to me at least some of his behavior, in that role, was ill-advised and ethically questionable.

I am not the first, nor the last, to reach that determination.

In closing, I’ll just say that even though one’s reputation can be bashed, if one’s integrity is as adamant and unyielding as aggregated diamond nanorods, the bashing will do neither significant nor lasting damage. Conversely, if one is not quite an impregnable ethical fortress, the bashing of one’s reputation can do serious harm.

Joltid Versus Volpi: The Antagonism Intensifies

The high-stakes battle for Skype already was contentious, even bitter.

It became poisonous today when companies controlled by Niklas Zennstrom and Janus Friis filed a motion for a preliminary injunction against Michael Volpi and venture-capital firm Index Ventures in the United States District Court for the District of Delaware.

In the motion and accompanying supporting documentation — filed by Joost US, Inc., its indirect parent company Joost N.V., and Joltid Limited — Volpi, formerly the CEO and chairman of video-sharing company Jooost, and Index are accused of a veritable panoply of chicanery and outright malfeasance. Many of the allegations are nothing short of incendiary.

Flowing from intellectual-property disputes and lawsuits relating to Joltid software technology, the motion is intended to prevent eBay from completing the $1.9-billion sale of a 65-percent interest in Skype to a group of investors that includes Index Ventures, private-equity firm Silver Lake, venture-capital firm Andreessen Horowitz, and the Canada Pension Plan Investment Board.

Zennstrom and Friis would like to own Skype, in whole or in part, and they’re desperate to stop eBay’s Skype deal from coming to fruition.

A press release announcing the preliminary-injunction motion spells out the plaintiffs’ immediate objectives:

The Motion for Preliminary Injunction asks the Court to enjoin Index and Volpi from using any of Joost’s and Joltid’s confidential information regarding (among other things) the Global Index Software, the technology developed and owned by Joltid that provides the peer-to-peer capability embedded in the Skype program. The Motion also asks the Court to enjoin the defendants from:

(i) using the confidential information in connection with the operation or strategic planning of Skype;

(ii) communicating such information to other parties in the “Buyout Group” that has made a bid to acquire Skype from eBayInc.;

(iii) soliciting employees of Joost and Joltid with offers to join Skype;

(iv) having communications with current or former employees of Joost orJoltid regarding the companies’ confidential information; and

(v) further participating in the Skype acquisition or assuming any position with Skype until a final adjudication of the merits of the case.

Citing allegations made against Volpi and Index Ventures in a lawsuit filed on September 19, the filing flatly asserts that “the entire transaction is . . . . infected with Volpi’s misconduct.”

Those who haven’t been following this complex and personally fraught conflict can be forgiven for not understanding the complicated drama without the benefit of an annotated program. As I attempted to explain in an earlier post, the allegations are centered on former Cisco wheeler-dealer Volpi’s tenure as CEO and chairman of Joost, a company founded by Zennstrom and Friis.

Like other companies – such as Kazaa and Skype – launched by Zennstrom and Friis, Joost leveraged and licensed underlying peer-to-peer software code from subsidiary companies (including Joltid) also owned by Zennstrom and Friis.

In 2008, during Volpi’s unsuccessful reign at Joost, he is reputed to have led an effort to shift the company’s client-based software and p2p architecture – based on Joltid’s Global Index (GI) software, which also provides the underpinnings for Skype — to a web-based model with a centralized server-based architecture. Although he cited business and technological reasons for the move, Zennstrom and Friis contend skullduggery was afoot.

Essentially, the plaintiffs assert, Volpi used inside knowledge of how Global Index and other Joltid software worked to help Skype violate terms of an executable-license agreement it had struck with Joltid for use of the General Index software. Unlike Skye, Joost had a license for the source code.

Meanwhile, Joost’s fortunes were waning while Skype remained popular with millions worldwide as a means of conducting presence-based voice, IM, and video communications.

At some point, in early 2009, while he still was the CEO of Joost, Volpi is accused of conspiring with his colleagues at Index Ventures on a plan to gain a controlling interest in Skype, partly through his knowledge of how Joltid’s General Index functioned. The plaintiffs allege that Volpi, trading on confidential technical information he obtained at Joost, made himself indispensable to the “buyout group,” and that he subsequently met with senior executives at Skype to discuss technical workarounds that would extricate that company from its lawsuits with Joltid over use of General Index code.

Volpi is also alleged to have attempted to poach employees at Joost who had intimate knowledge of how the disputed p2p software worked.

A welter of email correspondence and other documentation has been adduced by the plaintiffs to support their case for an injunction. Some of those background documents make for fascinating reading, particularly Volpi’s email correspondence relating to the structure of the Skype deal.

I might revisit some of that content in future missives. Suffice it to say, Volpi’s remark about Charlie Giancarlo – now with Silver Lake Partners, but formerly an executive counterpart of Volpi’s at Cisco – will raise eyebrows.

Said Volpi of Giancarlo: “Charlie is a good guy, but not a superstar . . . . His core asset at Cisco is (sic) that he was much more inclined to say “yes” to John (Chambers, Cisco’s CEO) than I was.”

Considering Chrapaty’s Move from Microsoft to Cisco

A senior Microsoft executive left for Cisco Systems earlier this week, setting off speculation about what the move signified.

Debra Chrapaty was Microsoft’s VP for Global Foundation Services, responsible for the company’s physical infrastructure, security, and global delivery operations. She would have been involved with data-center rollouts of Microsoft’s Azure, a cloud platform designed for intra-enterprise or Internet-delivered application services. She also would have been involved with the delivery of the online version of Microsoft Office.

It’s the connection to Office Web Apps that is particularly interesting about her move to Cisco, where she will become the senior vice president of Cisco’s collaboration software group (CSG). The group was previously run by Doug Dennerline, who left Cisco to become SalesForce.com’s executive vice president of sales for the Americas.

A few months back, Dennerline said Cisco might compete with Microsoft and Google in offering office applications, such as documents, spreadsheets, and presentation packages. He said Cisco was “thinking about it, but (is) not there today.”

What Cisco already has, of course, is WebEx, the web-based conferencing and collaboration service it bought for $3.2 billion in 2007. Cisco also competes against Microsoft and others in premise-based unified communications. It also is adding its telepresence to its collaborative portfolio.

Earlier this year, Cisco CEO John Chambers talked about “Cisco’s collaboration imperative,” terming it one of Cisco’s “market adjacencies.” Said Chambers:

“We believe that we are very well positioned in the industry from a vision, differentiated strategy, and execution perspective. We believe we are entering the next phase of the Internet as growth and productivity will center on collaboration enabled by networked Web 2.0 technologies. We are going to attempt to execute a strategy over the next decade that is similar to what we did in the early 90s and as we’ve said before, it powered our growth for the next decade.”

One could argue Cisco is on the brink of imperial overstretch, taking itself in too many ambitious directions at once. One could also argue that while Cisco has a sound collaboration strategy, and strong underlying products that show well against competitive offerings, it might be folly for Cisco to add online document, spreadsheet, and presentation packages to its roster. Are they something Cisco really needs? Is that it a battle it wants to fight?

Maybe the answers are yes, maybe they’re no. Nonetheless, Cisco plans to play a leading role in hosted collaboration, and it has a solid foundation on which to work.

Irrespective of why and how Chrapaty made her way to her new corporate home, Cisco attaches considerable strategic importance to the group that she’ll run.

To Win Nortel, Avaya May Need to Make Concessions to Canada

Despite the ulterior motives and attempted misdirection of RIM, the Canadian government had no valid objection to Ericsson’s successful $1.13-billion bid for insolvent Nortel’s wireless assets.

In the case of Avaya’s $900-million bid for Nortel’s enterprise business, the situation is different. One could credibly argue, as Andrew Willis of the Globe and Mail has done, that Canada’s net benefit from Avaya’s acquisition of Nortel’s enterprise business is significantly less than what would have accrued from a successful bid by Siemens Enterprise Communications.

It isn’t surprising, then, that Canada’s federal government will review the Avaya purchase under the country’s foreign investment legislation, known as the Investment Canada Act.

Industry Minister Tony Clement explained that the review was automatically triggered because of the size of the deal. Under Canadian law, the government can review a sale to a foreign company if it considers it a threat to national security or if the transaction value exceeds C$312 million (US$287 million).

In this case, the deal is being reviewed strictly on valuation. The Canadian government chose not to review the Ericsson deal because the book value of the wireless unit was below the review threshold and because Ericsson’s ownership of the assets did not pose a national-security threat. Even if that transaction had fallen within the review threshold, Clement explained, it would have been approved because it was deemed to have offered sufficient net benefit to Canada.

Avaya, though, has reason for concern. Clement mentioned that Siemens intends to hire Canadians and expand wireless operations in Canada. Under Avaya, Canadian jobs will be less secure, and Avaya has made no firm commitment to expand wireless operations in Canada. Under Siemens Enterprise Communications, a worldwide headquarters would have been established in Toronto. Avaya has no intention of moving its headquarters from New Jersey to Canada, regardless of whether it obtains Nortel’s enterprise assets.

Fewer Nortel products are likely to survive under Avaya than under Siemens. That will result in fewer Nortel jobs, in Canada and elsewhere.

In light of the benefits offered by Siemens, Canadian opposition parties have objected vociferously to the Avaya bid. Canada is under a minority government, with an election possible at practically any time. The dissolution of Nortel, with the resultant loss of relatively high-value technology jobs, could figure into political calculations.

Clement has said Canada must send a signal to foreign bidders that it will review takeover deals on an impartial basis. He says the government will consistently apply the same standards when scrutinizing purchases of Canadian companies.

That may be so, but politicians being politicians, electoral calculations will figure, too.

At the very least, Avaya should expect to make some concessions to the Canadian government, perhaps in the form of binding commitments to jobs and R&D in Canada.

Volpi’s Joost Tenure Key to Understanding Skype Saga

Perhaps the key to understanding the increasingly bitter battle for Skype can be found in what transpired during Michael Volpi’s tenure as the CEO of Joost, the video-sharing startup founded by Niklas Zennstrom and Janus Friis.

In the current context, what’s important about Volpi’s reign at Joost is that it coincided with an architectural change in how the company delivered video over the Internet.

I was reminded of Joost’s architectural overhaul by Julian Cain, an engineer who worked on Kazaa and is familiar with Joltid, bluemoon, and Skype. Cain, as you’ll recall, was a source for an earlier post I wrote on the deepening antagonisms between Skype’s founders and its current and would-be owners.

Zennstom and Friis originally set up Joost with the p2p architecture that formed the technological basis for companies the pair had founded previously, including Kazaa and Skype. In 2007, Michael Volpi became Joost’s CEO. Under his leadership, and evidently as part of a project he led, Joost slowly began an architectural transition away from its p2p roots. As Cain explained in a email message last night:

In case you don’t know how the Joost migration worked, well, it simply began to use p2p less and the long-tail providers more. Killing the Joost client for an ActiveX/NPAPI plugin with a p2p runner application for p2p services, and then removing the Joost plugin from download, is what abolished the p2p network for good. If the website could not load the Joost plugin, then it used Adobe Flash. It was seamless;, however, they didn’t have to deal with paid services and such a large user-base and other factors. Of course, look what Joost is now.

That architectural change looms as a central issue in the lawsuit Joltid, the company owned by Zennstrom and Friis, filed against Volpi and his colleagues at Index Ventures last week. That, of course, was the latest in a series of legal dustups between Zennstrom and Friis on one side and Skype and eBay on the other.

At the time of the architectural shift at Joost, Volpi claimed plausible reasons for the change. The justifications were commercial and technical. Other video-sharing sites, namely YouTube and Hulu, had proven far more popular. Meanwhile, some Joost users had complained that videos were slow to load.

Nevertheless, Cain contends those weren’t necessarily the only reasons Volpi pushed for the architectural overhaul.

Volpi’s move from p2p to Adobe Flash while at Joost wasn’t in any way to do with the lack of gain at that time. If they wanted to (do so), they would have been pushing HD content (both live and prerecorded) over p2p with long-tail back-off by now without any real competition . . . . . Volpi broke that into myths and theories based on what he wanted to do, not technical facts, trends, statistics or analytical data.

Still, Volpi had successfully transitioned Joost from the Joltid p2p foundation on which it was based. He’d moved it onto a server-based architecture that used Flash-based clients at the end points. He’s done it once. There’s no reason to think he couldn’t do it again, this time at Skype.

If the conflict plays out the way Cain believes it will, Zennstrom and Friis will not back down and neither will Volpi and his confederates.

In my last post on this topic, I suggested a settlement might be possible. Cain believes that isn’t in the cards. Both sides are playing to win, and neither is in the mood for accommodation. One way or the other, it will be settled in court.

I also said in my last post that eBay and Skype’s new majority owners would have to rebuild Skype from the ground up to obviate the lawsuit Joltid has filed regarding the disputed “Global Index (GI)” software, the patent for which became active early this year. While it remains true that Skype would have to be reconstituted from scratch, the reconstruction effort could be completed earlier than I anticipated.

A means of getting there faster is represented by technologies offered by Adobe. Henry Sinnreich and a team of SIP experts have worked for Adobe for a long time now, and Cain reminded me that Adobe Flash supports SIP p2p with NAT traversal. He explained as follows:

Don’t forget Adobe Flash has SIP and p2p with NAT traversal as well. This would be very easy to offload the client without much interruption; however you can kiss the desktop client and p2p network goodbye.

Om Malik wrote a post in 2008 that foresaw the implications of Adobe’s work in this area. Commenting on the advent of Flash p2p, Malik wrote:

The reason we should pay attention to this product is Adobe’s distribution strength. The company can easily upgrade its Flash clients and instantly become owner of one of the largest p2p services. What that means is that now anyone can contemplate a Joost-like service that works within a browser. Using AIR to extend those p2p abilities to the desktop would be fairly easy as well.

So, the move to a new client architecture could be achieved with relatively minor disruption to Skype’s operations. Meanwhile, the service’s registration index would have to be transferred to a centralized server-based model.

It appears Volpi and company have a solid plan in place, and one can assume they’re well on their way to executing it. Not for the first time — and certainly not for the last – I stand corrected.