Veraz, Dialogic Join Forces in All-Stock Merger

IP equipment makers Veraz Networks (VRAZ) and Dialogic Corp. are merging as bandwidth and mobility demands challenge service providers’ limits.

The news came on Wednesday, the same day Veraz reported a first-quarter loss of $5.2 million, compared to losses of $4.1 million in the year-ago period, and a 14 percent drop in revenue – down to $16.1 million. In a Securities and Exchange Commission filing, Veraz said a merger is necessary now because it needs higher revenue and profits to “absorb costs of being a public company.” Veraz also said it needs a broader product line “to be more relevant and important to our customers.”

Enter Dialogic. The privately held company, based in Canada, brings six products to the table that Veraz does not have; both firms make multimedia gateways. Together, Veraz and Dialogic expect to report revenue greater than $250 million per year; employ 1,000 workers; and have 3,000 service provider, enterprise and partner relationships.

The companies will operate under the Dialogic name – since Dialogic shareholders will own 70 percent of the company in the all-stock deal – and trade on the Nasdaq, where Veraz lists its stock. Nick Jensen, Dialogic’s board chairman and CEO, will retain those roles at the combined Dialogic, while Veraz President and CEO Doug Sabella will become president and COO. Headquarters will be located in Veraz’s San Jose, Calif. facilities.

“The future will bring even greater demands on the networks due to the unprecedented growth in global mobile data and video traffic,” Jensen said in a prepared statement. “By combining Dialogic’s proven expertise in application enablement for voice and video with Veraz’s leadership in voice, data, session control, security, and transport we will be creating a company with innovative products that will enable our customers to unleash the profit of video, voice and data for 3G/4G networks.”

The transaction should close in the second half of 2010.