comMATCH: No strategic investors, please

Telrad has seven start-ups left in its arsenal, after selling NetEye to ECtel. Telrad is trying to either bring in a strategic investor for each of these companies or sell them – except for comMATCH (not to be confused with Commtouch (Nasdaq: CTCH)).

So why do all these companies deserve a strategic investor, while comMATCH doesn’t? Because comMATCH’s technology is enabled, meaning that it can be used with products from any communications equipment manufacturer, not just one of them. It is therefore not worthwhile for Telrad to bring in a strategic investor like Cisco (Nasdaq: CSCO) or Be Connected, thus preventing the company from working with all types of end-user equipment.

In any case, comMATCH claims it has not yet begun an official financing round, but says that when it does, it will raise $10 million. Telrad has invested $10 million in the company to date, and will provide the start-up with $5 million in loans.

The first development team, which founded comMATCH, began as a development unit within Telrad, headed by comMATCH CEO Menachem Honig. The company was officially formed in March 2000, in order to develop an access gateway for communications providers. Using comMATCH’s gateways, communications operators can offer the existing features of a normal telephone (answering machine, follow me, call-waiting, and more) on IP (Internet Protocol) networks.

ComMATCH appeals to DSL cable communications operators and wireless Internet access operators competing with the large communications providers. One important feature for these companies is that it enables them to meet the tender terms set by the regulator in each country. What does the regulator care about? He wants the communications operator to put its communications systems at his disposal, in case he should have to eavesdrop on one of the network subscribers. Eavesdropping on a subscriber on IP networks is virtually impossible, but using comMATCH’s technology, eavesdropping capabilities can be transferred to IP from the old networks.

This is of course only one example of the network capabilities made possible by comMATCH’s technology; the inclusion of all the old recognized capabilities of current telephony enables the new communications operators to offer their customers a complete service package. ComMATCH senior VP marketing and sales Naty Drutin sums it all up by saying, “We’re not re-inventing the wheel; we’re enabling people to use it.”

ComMATCH sells its technology through integrators and distributors, and has so far refrained from opening offices in every country in which it does business. In Europe, the company has agreements with Telindus in the Netherlands, IBM Global Services in Germany, and Siemens (NYSE: SI; Xetra: SIE) in Belgium.

The next generation of communications networks utilizes software switches (softswitches), which will replace the current switching systems and allow the full range of features to be used on the network. One of the best known of these features is unified messaging, which users will be able to access from the Outlook screen. The same softswitch will distinguish between faxes, e-mails, phone calls, and beepers, and put them all in one location. Messages must currently be examined in a number of places: faxes, both cellular and regular telephone voice mailboxes, e-mail, and so forth.

According to Drutin, these softswitches are not meeting expectations, and are not doing the job. He believes it will take many years before softswitch technology matures. Meanwhile, we will see a combination of comMATCH’s current technology and softswitches, he said.

Drutin: “When VoIP (voice over Internet Protocol) began, they thought our solution would be temporary, and communications companies would eventually prefer to install softswitch systems. It now looks like these systems will be around for at least another 10 years. All the research companies say so explicitly.”

In order to integrate its product with softswitches, comMATCH signed a cooperation agreement with congruency Inc., which provides VoIP software.

”RHK published a report saying we controlled 13% of the market,” Drutin says. “That’s without entering the US market.” For now, comMATCH has penetrated Europe and South America, with field trials. The company is interested in penetrating the Far East in the future, and eventually the US.

The reason why the company has refrained from entering the US was the US standard for hooking up to public exchanges, which is different from the European and South American standard. In the US, ComMATCH also had tow competitors - Nuera and TollBridge, which focus on the US market. Drutin says soothingly that just as the competitors plan to penetrate the European market, comMATCH plans to penetrate their home field.

Commercial sales of comMATCH’s products, which provide links for both the cable network and systems that enable wireless access to IP, are just now beginning. ComMATCH finished 2001 with $4 million in sales. Drutin says the company will sell at least twice as much in 2002, while consolidating its positioning in Europe.

According to Drutin, working with integrators is the best method and is better than opening offices. He adds that the customer wants to see the same company selling, installing, and providing service. “It’s convenient for an Israeli company to work in this manner,” Drutin says. “Otherwise, we’ll have to start paying too much attention to service centers around the world. Thanks to the integrators, we only handle grade 3 and 4 malfunctions in Israel. It’s much cheaper in the long run. It’s better to take somebody local, who speaks the language. You can’t work that way in the US, because there they expect you to have a presence. In the rest of the world, you can work with integrators.”

Published by Israel's Business Arena on January 8, 2002