AudioCodes (Nasdaq: AUDC; TASE: AUDC) has acquired another US company, two months after it acquired Nuera Communications Inc. for $85 million. The company announced today that that it entered into a definitive agreement to acquire Netrake Corporation for $10 million in cash and a further $1 million if Netrake achieves certain financial measures by the closing date. The deal is expected to be closed in the third quarter of 2006. AudioCodes had $227.6 million in cash and cash equivalents at the end of the first quarter, before the acquisition of Nuera, of which $177.6 million was cash and short term investments.
Netrake provides fixed and mobile service providers with real-time delivery of voice and multimedia solutions across IP networks, as well as gateway solutions.
AudioCodes, which is run by chairman, president and CEO Shabtai Adlersberg, develops, manufactures and markets VoIP-based technologies and products. The company currently has a market cap of $450 million, after falling 24% since mid-April. Today’s announcement sent the stock up 2% in trading on the Tel Aviv Stock Exchange (TASE).
AudioCodes VP finance and CFO Nachum Falek said, “The great thing about the Netrake acquisition is that it enables AudioCodes to enter a new technological field. If AudioCodes was considered up to this point as a ‘gateway’ company, that is to say, a company that specializes in connecting old communications systems to new ones, we now have a new field, session border controllers (SBC), which provides connectivity across the various IP networks. The IP roll-out is continually expanding, and there is a greater need for an element that will sit between two networks and connect them. Netrake’s second product focuses on Gateway Security, and is a form of firewall securing network traffic. It can also be used in cellular applications.”
Netrake was founded in 2000. The company posted sales of $5 million in 2005 and is expected to increase this to $6 million in 2006, and then by a further 50% in 2007. The company is not currently profitable, and is expected to reach break-even in 2007. Until then the deal will have a negative effect on AudioCodes’ bottom line, with the company expecting net profit to decrease by $3 million, or $0.07 per share in 2006-2007. The average market estimate expects AudiCodes to post a net profit $20.2 million, or $0.46 per share.
Globes: Netrake has so far raised $50 million from venture capital funds. Does this mean that the price you paid was exceptionally cheap?
Falek:” That is a logical conclusion and is perfectly in order, although I would rather not comment further. Netrake has received substantial investment, it is a leader in its field, and it is developing innovative technologies. I therefore believe we will be able to leverage its advantages once we integrate it into our sales operations.”
Published by Globes [online], Israel business news - www.globes.co.il - on July 6, 2006
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