Israeli Firm Buys Nuera for $85M

After building solid connections with cable operators, including Cox Communications Inc. and Rogers Cable, voice-over-Internet Protocol technology provider Nuera Communications Inc. will soon be swallowed up by an Israeli competitor seeking a foothold in the U.S. cable market.

The company announced last week it will be acquired by AudioCodes for $85 million in cash, plus another $5 million payment to stockholders if Nuera hits certain revenue milestones in the coming year. Once the purchase is complete — sometime at the end of the second quarter or early in the third quarter — Nuera will become a wholly owned AudioCodes subsidiary.

Nuera and AudioCodes both provide VoIP gateways, crucial pieces of network gear that act as a translator between IP voice networks and the larger circuit-switched plain old telephone service (POTS) network. Also referred to as media gateways, they convert IP voice traffic headed for the POTS network into circuit-switched signals, and do the reverse for voice traffic coming from the POTS network.

The two companies have dueled in the VoIP gateway market in Europe, but aside with some distribution deals with network gear providers — most notably Nortel Networks — AudioCodes until now has not made strong headway into the active U.S. cable VoIP market.

“We’ve been active with our media gateway technology, but essentially more into the wireline and wireless markets, and less to the cable markets,” AudioCodes chairman and CEO Shabtai Adlersberg said in a conference call discussing the deal. “We’ve been able to win some accounts in Europe, but at the end of the day we’ve been quite late to the North American market. In many ways, Nuera is a leader in that market.”

Small wonder AudioCodes is interested in the U.S. cable voice market. In 2005, there were about 2.5 million VoIP subscribers in North America, and estimates are that will grow to 22 million in 2009. In addition, cable operators are forecast to capture 40% of the 100 to 120 million fixed VoIP lines in the next five years, Nuera CEO Bill Ingram said: “That’s the big battle that’s going on right now.”

Although much smaller, Nuera has been an active competitor against equipment giants Cisco Systems Inc. and Siemens for U.S. cable VoIP business, with its ORCA line of voice gateways. Its client list includes cable providers Cox and Canada’s Rogers and Le Groupe Vidéotron Ltée. It also includes smaller firms Ellijay Telephone Co., Troy Cable and Panhandle Telephone Cooperative.