Better times ahead for softswitches

Recent softswitch announcements indicate that while tough times still lay ahead for the companies trying to sell these devices, better times are coming.

Sonus Networks Inc., considered one of the more formidable softswitch vendors, announced quarterly revenue of US$21.2 million, which hit its target, but this was down 46 percent from the previous quarter. "We believe that it remains challenging for Sonus to find new customers to offset its previous large, but currently financially troubled, customers," UBS Warburg LLC says in its review of the revenue.

Even so, there is reason for hope. Warburg notes that the company did some admirable cost savings, and another financial analyst firm, Wachovia Securities Inc., notes that customer trials now going on could turn into sales once carrier spending loosens up a little. Wachovia expects that to happen by year-end. Wachovia also expects that the largest buyers of phone switches, the regional Bell operating companies, will start accelerating their purchase of these server-based switches and their associated media gateway hardware that connects packet and circuit networks.

A recent report by IDC backs up this prediction of a bright future for softswitches. It points out that today worldwide revenue for softswitches and associated media gateways are $1 billion, but will grow to $9 billion by 2005. In addition, minutes of long-distance voice calls based on IP (Internet Protocol) are on the rise and will exceed traditional circuit minutes in 2006, IDC says. More IP voice means more need for softswitches and media gateways.

While IDC calls the current market for phone equipment "telecom winter," there are signs this month of an approaching spring:

Telica announced Penn Telecom, a phone company near Pittsburgh, will buy its softswitch.

CopperCom announced that Hosting-Network, a competitive local exchange carrier in Florida, will use its gear for dial-up Internet access services.

Santera Systems announced that TDS Telecom in Madison, Wisconsin, will use Santera's gear for local switching.

These could be the first signs of the thaw.

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More about CopperComIDC AustraliaSonusSonus NetworksTelicaUBS WarburgWachoviaWachovia Securities

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