Allot to acquire Flash Networks for $110 /$120 M?

This is the latest rumor from Globe. Allot, who has raised almost $80M a month ago and was rumored to be acquired by F5, then to discuss acquisition of Mobixell or PeerApp last year, has a $500M market cap. Flash Networks has raised over $61M.

The resulting company could be booking about $120M in sales and be profitable.

Allot, in a briefing with Jonathon Gordon, Director of Marketing, two weeks ago was noting: " Our policies focus more and more on revenue generation. With over 100 charging plans surveyed in our latest report, we see more and more demand for bundle plans for social networks and video. We can already discriminate traffic that is embedded, for instance, we can see that a user is watching a video within a facebook browsing session, but we cannot recognize and analyse the video in term of format, bit rate, etc...Premium video specific policies raise a lot of interest these days."

No doubt, the acquisition of an optimization vendor like Flash Networks can solve that problem, by creating a harmonious policy and charging function that actually manages video, which accounts for over half of 2011 mobile traffic globally.

As discussed here and here, video optimization becomes an attractive target for telco vendors who want to extend beyond DPI and policy. Since video is such a specialized skill, it is likely that growth in this area will not be organic. It is likely that the browsing gateway / DPI / PCRF / Optimization segments will collapse over the next 2 years, as they are atomized markets, with small, technology-driven under-capitalized companies and medium -to-large mature companies looking to increase market share or grow the top line.

Carrier strategy against OTT: vertical integration

In an interesting new development, Bell and Rogers, respectively 29 and 36% market share of the Canadian wireless market and fierce domestic competitors, join forces to acquire a majority share (75%) in Maple Leaf Sports and Entertainments (MLSE) for $1.32Bn.


Bell had already started vertical integration by acquiring the remaining 85% of CTV for $1.3 Bn last year and owns also  TSN, TSN2 and NHL Network Canada as well as a minority share of NHL's Montreal Canadien. Rogers owns the Toronto Blue jay baseball team and the broadcast network Sportsnet.


MLSE provides Bell and Rogers with co-ownership of Toronto Maple Leaf NHL team, Toronto Raptor NBA team, Toronto FC MLS team and the Air Canada center.


This is a very good example of vertical integration. The Canadian market is fairly mature, but with a high broadband penetration and a relatively low mobile broadband penetration (75%), growth is coming from smartphone and media consumption. Rogers, with 44% smartphone market share and a blended ARPU of 60$ and Bell with 26% market share and 53$ ARPU are among the most profitable carriers in North America.


At the same time, as competition increases with wireless new entrants (Videotron, Wind, ...) and OTT offers (BBC iPlayer, Netflix...), Rogers and Bell understand that the key to profitability is content. Buying these sport teams is a way for Bell and Rogers to secure premium attractive content for their domestic market, retaining control (duopoly?) of the most sought after premium content franchises in Canada.