Civil discord

It's a sign of the economic times. The proposed merger between Unisphere Networks and BroadSoft has been torn asunder by “current market conditions” that made it difficult for Unisphere to accomplish a requisite initial public offering (IPO).

Because the merger was a marriage of convenience, not necessity, the two sides parted amicably and will continue to be friendly technology collaborators. They just won't enjoy the great riches that came unabated only a year ago to companies that managed to merge.

“From a Unisphere/BroadSoft perspective, we would have been pretty happy if we could have gone out, had an IPO, and everyone [had] gotten filthy rich,” said Scott Wharton, BroadSoft's marketing vice president. “From a core business perspective, I don't think it makes much of a difference.”

That's because the two companies have products that stand alone and are doing reasonably well on their own, said Grier Hansen, carrier and optical infrastructure analyst for Current Analysis.

The merger would have brought Unisphere some “next-generation applications and that's about it,” Hansen said. “It absolutely is a wacky economy. [The merger] is really a good value-add, but right now isn't necessarily the time to focus on value-adds; right now is the time to deliver core product.”

Without BroadSoft, Unisphere will focus on “IP infrastructure for voice and broadband services,” said Tony Scarfo, vice president of marketing for Unisphere. “We're involved in creating that common infrastructure to support voice, video and data services.”

BroadSoft would have added a suite of applications such as follow-me, conference calling and managed directory, Scarfo said.

A merger would have let Unisphere offer these features as part of its branded package, but “as a separate company, we can still offer the same thing; it just gets into margin and pricing and how you integrate them,” Scarfo said.

Customers will get “an integrated solution either way,” he added.

The merger fell victim to a cautious economy that has withdrawn from participating in most venture-capital-intensive projects, regardless of the companies' prospects.

“Had the capital markets stayed strong and Unisphere could have bought BroadSoft in an all-stock deal, it was a great win-win, but with the capital markets not supporting that, this is probably the best win-win,” said Christine Heckart, president of TeleChoice. “Last year, this was the right thing to do for both of those companies, but the market conditions have changed substantially.”

Separately, the two companies can work together as they have in the past and focus on their “primary core competencies,” Heckart said. “That's always a good thing.”

BroadSoft's business plan even takes advantage of the weakened economy, Wharton said. “We're hoping to turn this downturn into some positive for us,” he said. “We're not just an infrastructure widget, we're something that helps a service provider gain revenue to differentiate themselves.”

The two companies will continue a close relationship, Wharton added.

Unisphere will provide the infrastructure for next-gen networks, routers, gateways and softswitches, and Broadsoft will have the applications to complement that, Wharton said.

“The logic of working together is still there, but we just decided to do it as independent companies rather than [as] a merged entity,” he said.

The new, slower economy might just be a reality check, Hansen said.

“We were really looking too far ahead. You don't solve a problem by solving the next 10 problems that are going to come up after that,” he said. “At the same time, those that had viable platforms [are] just going to happen in slower buildouts. Instead of a two- or three-year timeline, we're talking three to five, even 10 years before we get into things like a Class 5 replacement.”