Canada's Newbridge spent $234 million to purchase Northchurch Communications, which makes a high-end Internet Protocol-based router, and TimeStep, a company that focuses on virtual private network (VPN) technology, creating inexpensive and secure connections to corporate networks via the Internet.
Newbridge is known for its asynchronous transfer mode (ATM) device offerings, which send voice and data signals over telecommunications lines at high speeds. But the company has been sorely lacking technology that transmits signals using Internet protocol (IP), a growing niche in the networking market.
"People have been asking us, 'What is your IP story? Why haven't you said anything about IP?' We're taking that off the table," said Newbridge president Alan Lutz.
Analysts say the acquisitions are important for the company to compete against Cisco Systems, Lucent Technologies, Nortel Networks, and other networking firms which are after the lucrative service provider space. Telecommunications carriers and Internet service providers have ramped up their offerings of IP-based equipment to meet demands for a high-speed Internet.
"It looked like they were falling behind. This shows they're still in the game and going forward," said analyst Michael Howard of Infonetics Research.
Newbridge previously had minority investments in Northchurch and TimeStep, Lutz said. Northchurch's technology allows service providers to offer customers a more sophisticated set of IP-based services, such as VPNs, he said.
"The real message here is not that we can help put in IP networks, but that service providers can make money selling services," said Lutz, who wouldn't rule out more acquisitions in the future.