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News and analysis of developments in the enterprise communication industry and market with primary focus on Europe.

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Tuesday, August 07, 2007

Software PBX maker Sphere Communication to become a part of NEC Corporation

Software based PBX maker Sphere Communication has agreed to become a part of NEC Corporation. The Japanese manufacturer of electronics goods NEC Corporation is to acquire all shares, intellectual property and patents of Sphere for an estimated $ 42.1 million.

Sphere Communication is a tier-2 supplier of software based communication services available primarily in North America. One of the key assets of Sphere is its development platform (Sphere Communication Services Engine) that remains an object of envy for many. Its user-based pricing approach is its competitive advantage. This underlies its best-of-breed approach. Based on open technology, its PBX can work with a multitude of third party phones including Aastra, Grandstream and Polycom. They inter-work with third party voice media gateway from the likes of Allied Telesys and AudioCodes.

NEC on the other hand has a wide breadth of portfolio that ranges from TDM to IP. Frost & Sullivan analysis by Kriti Rao suggests NEC is ranked fourth in terms of market share in N.A. One of the main challenges facing the company is related to transformation and this is exactly where Sphere comes in. Sphere has a small team of talented people who have a forward-looking vision.

NEC Corporation has been focussing on growing their office equipment business for over two years now. They have a JV with Philips in Europe. In addition, they have something called NEC Infrontia. In the U.S the operating business is NEC United Solutions. With the acquisition, Sphere will be absorbed as a operating unit in NEC United solutions. We are yet uncertain of the autonomy of Sphere in the future. Todd Landry, Senior Vice President, Sphere Communication said "this announcement will help Sphere scale and expand its reach".

I am told that channel partners have nothing to fear. Most of them will be happy to include NEC's portfolio. I am not sure. The utility of Sphere's business with their distribution networks is very different from NEC's. Moreover, it will be interesting to see how Sphere's technology partners take this announcement. Overall, I think this is a good deal.

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