Jul 14, 2008 12:00 PM,

Slowdown feared in enterprise VoIP

By Ed Gubbins

Is the enterprise voice-over-IP market getting soft? That's the subject of a lot of industry chatter leading into earnings season, which should provide some answers.

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Eric Kainer, an analyst with ThinkPanmure, said he'd heard “whispers” from a handful of carriers and vendors at NXTcomm08 last month about softening demand for session initiation protocol (SIP) trunking — using Internet connections to link enterprise PBXs to the public network. Though based only on anecdotes, his concern swelled this month when Acme Packet, a VoIP equipment vendor, warned of a second-quarter revenue shortfall.

Acme blamed its 25% miss (of more than $8 million) on orders that hadn't closed in time to be recognized in second-quarter revenue, but because the phenomenon was broad-based, it led analysts to wonder if macroeconomic trends are slowing sales in the enterprise VoIP sector.

“We believe that carrier demand continues at a high level but that spending is much more restrained,” Kainer wrote in a research note following the Acme announcement. “We are discouraged by what appears to be less robust demand than expected coming from enterprises, as typified by SIP trunk demand. Moderation in demand for SIP trunks most likely will ultimately impact vendors and carriers across the industry. … We fear that this weaker VoIP environment will persist until the global economy improves, enterprises accelerate adoption of VoIP, or a new catalyst arises.”

Still, Kainer said the picture will be clearer when IP provider Cbeyond, which cited weakness in the small business sector in February, reports its second-quarter results. Though denying any major market shift in a conference call this month, Acme Packet ultimately submitted to the same wait-and-see attitude.

“If, four weeks from now, my field sales organization says, ‘I'm not sure this [revenue] is coming in Q3,’ then I'd say, ‘Wow, maybe there is a global phenomenon based on carrier spending,’” said Andy Ory, CEO of Acme. “But I'd not draw that conclusion right now.”