Cisco acquires software developer for $55 million

Dynamicsoft, based in Parsippany, N.J., makes software development tools based on the Session Initiation Protocol, or SIP, standard, which can be used by carriers to launch new interactive multimedia services over the Internet. SIP is a standard protocol that enables collaborative communications such as conferencing, telephony, presence, events notification and instant messaging over an IP network.

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Cisco hopes the addition of Dynamicsoft's technology will help it win contracts with broadband service providers who are expanding their service offerings to include voice over Internet Protocol, or VoIP, and other multimedia services. Cisco faces stiff competition in this market from voice technology veterans including Nortel Networks, Lucent Technologies, Alcatel and Siemens. These large companies, which already supply telephone companies around the world with traditional voice gear, also offer softswitch and VoIP technology.

"Broadband service providers are rapidly transforming their networks into service-delivery platforms, with intelligent endpoints, to fuel a new generation of IP-based communications services," Charles Giancarlo, senior vice president and chief technology officer of Cisco, said in a statement. "Dynamicsoft's portfolio of carrier-class infrastructure products, combined with Cisco's softswitch capabilities, will allow service providers to quickly develop and deploy highly scalable 'subscriber-aware' IP communications services using voice, video, messaging, presence, and other real-time capabilities."

Dynamicsoft was founded in 1998 and has received funding from Capital, Sun Microsystems, and Piper Jaffray & Company, among others. Cisco is not an investor, but Dynamicsoft has been one of Cisco's ecosystem partners.

Dynamicsoft was a pioneer in the SIP and voice-communication market. Jonathan Rosenberg, chief technology officer for the company, co-authored the SIP standard and has led many IP telephony and SIP efforts within the Internet Engineering Task Force.

The company sells three main development tools: the Dynamicsoft Presence Engine, AppEngine, and Service Engine. These products are used by wireline and wireless carriers to quickly develop new revenue generating applications. Dynamicsoft's technology has been particularly useful to wireless carriers, which have struggled recently to make up for declining revenue on their voice services. Ericsson, Siemens, Nortel and Alcatel all offer similar tools, according to Cisco.

Dynamicsoft currently has more than 100 customers, including Sprint, BT, Vonage, Level3 and Deutsche Telekom. Sprint has used the company's technology to build its push-to-talk cell phone service, which allows cell phones to be used like walkie-talkies.

Under the terms of the agreement, Cisco will pay approximately $55 million in cash, which includes the assumption of outstanding debt in the amount of $3.8 million, as well as working capital. Once the acquisition is finalized, Dynamicsoft's 104 employees will report to Don Proctor, vice president and general manager of Cisco's voice technology group.

This is the second acquisition Cisco has announced in less than a week. On Thursday, it announced it was buying the network management company NetSolve for $128.7 million in cash.