ZHONE SNAPS UP VPACKET

Zhone Technologies' acquisition of packet voice and data player Vpacket Communications last week marked the seventh acquisition for the Oakland, Calif.-based company. It also confirms a strategic shift for the access vendor, which previously was relying on its internally developed Single-Line Multi-Service architecture.

In part, Zhone's recent acquisitions have been driven by the number of vendors on the block. “There are some real tasties out there you can get at a bargain,” said David Markowitz, assistant vice president of marketing at Zhone.

“We like to invest in the distressed assets,” Markowitz continued, noting that this year's Supercomm resembled a big flea market. “There's a light out there — many people may not be able to see it yet, but its there.”

The deal wasn't nearly the scope of Zhone's acquisition of Nortel Networks' access business, but Vpacket does come with money in the bank. “This enhances our cash [position],” said Markowitz.

Unlike the Nortel acquisition, which gave Zhone the No. 3 slot in the digital loop carrier market, the Vpacket deal was based more on the company's technology and cash reserves. Vpacket doesn't have a significant customer base to bring to the table. But according to Markowitz, the company has done well with its international channels and has some common domestic accounts with Zhone.

However, Ron Westfall, principal analyst at Current Analysis, doesn't see Vpacket boosting Zhone's competitive position. “They're still trolling for cash,” he said.