Sonus Acquisition of Treq Labs SDN Assets. January 8, 2015

Transcription

1 Sonus Acquisition of Treq Labs SDN Assets January 8, 2015

2 Important Information Regarding Forward-Looking Statements The information in this presentation contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, which are subject to a number of risks and uncertainties. All statements other than statements of historical facts contained in this presentation, including statements regarding our future results of operations and financial position, business strategy, plans and objectives of management for future operations and plans for future product development and manufacturing, and statements regarding the impact of the Treq transaction on Sonus financial results, business performance and product offerings, are forward-looking statements. Without limiting the foregoing, the words anticipates, believes, could, estimates, expects, expectations, intends, may, plans, seeks, projects and other similar language, whether in the negative or affirmative, are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other f uture conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, the timing of our recognition of revenues; economic conditions; our ability to recruit and retain key personnel; difficulties supporting our strategic focus on channel sales; difficulties retaining and expanding our customer base; difficulties leveraging market opportunities; the impact of restructuring activities; our ability to realize benefits from the NET, PT and Treq SDN asset acquisitions; the effects of disruption from the Treq and PT transactions, making it more difficult to maintain relationships with employees, customers, business partners or government entities; the success implementing the integration strategies with respect to NET, PT and the Treq SDN assets; litigation; actions taken by significant stockholders; difficulties providing solutions that meet the needs of customers; market acceptance of our products and services; rapid technological and market change; our ability to protect our intellectual property rights; our ability to maintain partner, reseller, distribution and vendor support and supply relationships; higher risks in international operations and markets; the impact of increased competition; currency fluctuations; changes in the market price of our common stock; and/or failure or circumvention of our controls and procedures. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We therefore caution you against relying on any of these forwardlooking statements. Important factors that could cause actual results to differ materially from those in these forward-looking statements are discussed in Part I, Item 2 Management s Discussion and Analysis of Financial Condition and Results of Operations, Part I, Item 3 Quantitative and Qualitative Disclosures About Market Risk, and Part II, Item 1A Risk Factors in the Company s most recent Quarterly Report on Form 10-Q. Any forward-looking statement made by us in this release speaks only as of the date of this release. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. 2

3 Transaction Overview Transaction Definitive Agreement for Sonus to Acquire Treq Labs SDN Assets Price Approximately $10.1 million Closing Consideration Timing 100% cash Immediate closing (1/2/15) No regulatory approvals required Financial Impact Neutral to 2015 non-gaap EPS Equity Earnout Sonus common stock may be issued if certain substantial revenue hurdles are met Employees Retaining 9 key personnel 3

4 Equity Earn Out Agreement Sonus will issue up to ~6.6M shares of common stock over a 3-year period from 2015 to 2017 if aggregate revenue thresholds of at least $60M are achieved by the SDN business during that period Sonus will issue up an additional ~11M shares (~17.6M shares in total) if aggregate revenue thresholds of at least $150M are achieved by the SDN business during that period If initial revenue thresholds are not met, no shares will be issued Shares issuable under the Earn-Out Agreement are subject to proportionate adjustment to reflect adjustments to the Company s capital stock, which includes the reverse stock split referenced in the Company s press release dated January 8,

5 Treq Labs Overview HQ: Sunnyvale, CA Privately-held Technology Application-aware SDN (Software Defined Networking) intelligence designed to: Optimize network utilization through enhanced automation, analytics and resiliency Enable NaaS (Network as a Service) and bandwidth on demand Significantly reduce network costs and improves time to revenue Key Treq team members were charter members of Open Networking Foundation (ONF), the standards body for SDN 5

6 The Business Opportunity 1. Networks are becoming increasingly congested due to increasing consumption of media-rich applications such as video and UC 2. Operators have historically overprovisioned networks to handle congestion resulting in inefficient network monetization 3. This model is no longer economically feasible given rapid increase in network bandwidth driven by video and UC 4. A solution is required which can deliver predictable behavior in an environment of congestion via intelligent network control and application-aware policies 6

7 Transaction Rationale 1 2 Unique Focus on SDN Application Optimization Strategic to Sonus SBC and Policy Real-time Capabilities Validated Business Model with Rapid ROI Combination Creates New Architecture for Service Delivery 3 4 7

8 Transaction Rationale 1 2 Unique Focus on SDN Application Optimization Strategic to Sonus SBC and Policy Real-time Capabilities Validated Business Model with Rapid ROI Combination Creates New Architecture for Service Delivery 3 4 8

9 Treq Labs SDN Intelligence 1. Focused on optimizing application and policy aware networks for voice, video and UC applications Significantly reduces WAN costs, improves service deployment times and increases network resiliency 2. Allows service providers and enterprises to transform their networks from traditional IT operations to Network-as-a-Service (NaaS) Provides ability to turn up bandwidth-on-demand 3. Gives operators end-to-end view of their network Results in complete network QoS and dramatic improvement in network utilization 9

10 Treq Labs Differentiating Technology Key Capabilities more than a SDN controller Like other SDN controllers, Treq derives network topology and capabilities and overlays with existing network infrastructure without requiring re-architecture Treq SDN intelligence also: 1. Exercises end-to-end dynamic programmatic control of the network 2. Optimizes flows based on: Application demands Configured application policy Real-time network conditions 10

11 Transaction Rationale 1 2 Unique Focus on SDN Application Optimization Strategic to Sonus SBC and Policy Real-time Capabilities Validated Business Model with Rapid ROI Combination Creates New Architecture for Service Delivery

12 Anticipated Benefits to Network Operators Drives significant improvements in network utilization resulting in reduced network costs and associated capital expenditures Creates operational expense savings through more streamlined, automated provisioning, while also improving speed of services creation and deployment Transforms networks from traditional IT operations to Network-as-a-Service (NaaS), providing the ability to turn up bandwidth-on-demand Gives operators an end-to-end view of their network resulting in complete network QoS (quality of service) Eliminates vendor lock-in as a result of the hardware independent software-only solution 12

13 State Street Case Study State Street Bank, a global financial services leader, was using 22 Gigabit Ethernet WAN links to connect eight branch operations with little redundancy Only 20% of the WAN was being utilized The Solution: State Street deployed Treq s SDN platform to reconfigure all of its WAN links Provisioned optimal application flows and segregated traffic using easy to use web portal Simplified mapping of applications flows independent of physical network topology with minimal changes to firewall policies and router/switch configurations Implemented dynamic application SLAs that gave priority to latencysensitive and business critical applications The Result: State Street and was able to run all inter-branch traffic on seven Gigabit Ethernet links at 98% utilization. Reduced monthly WAN costs from $198k to $42k per month WAN costs dropped from more than $7M to approximately $1.5M over 36 months 13 Source:

14 State Street Case Study Benefits Number of Network Links Network Utilization 36 month WAN cost (monthly) Security Workload Routing Network Recovery Application Awareness Before 22 GE Network Links 20% 98% After 7 GE Ethernet links using transport of choice $7M ($198k) $1.5M ($42k) Vulnerable network security Rigid configuration Fault recovery One size fits all Native negative posture Flexible allocation of network resource by tenant, application Pre-determined fault recovery Dynamic applicationspecific SLA per user, application 14

15 Pacnet Enabled Network (PEN) Case Study Pacnet owns and operates a pan-asian submarine cable network that extends from India to the U.S and links enterprise-class data centers; operates 110 points of presence (POPs) The Solution: Pacnet used Treq s SDN platform to dramatically simplify and increase the speed of provisioning of network services to their enterprise customers Branded Pacnet Enabled Network (PEN), PEN is a scalable service platform customers can use to provision networks-on demand, paying on a per-use basis Connects users to company s network of data centers throughout Asia, Australia, and United States The Result: Pacnet enterprise customers can choose features they want such as application-specific SLAs instead of forcing one-size fits all approach Enterprises can provision/configure private networks through web-based portal that allows them to grab and drop endpoints, create multiple flows between endpoints, and control attributes of each flow For example, a company can create and uniquely route 10 different data flows between U.S. and Hong Kong, each based on different latency and bandwidth requirements Connectivity is usable the minute a user hits the deploy button compared to 15 to 45 days (or more) it can take to provision such connectivity manually Reduced churn among Pacnet s enterprise customers Pacnet s network is now more cost-effective and operationally efficient. Now, expensive WAN links between countries and data centers are fully utilized and monetized via software control of data flows associated with tiered SLAs 15 Source:

16 PEN Case Study Jim Fagan, President of Managed Services, Pacnet, in reference to PEN powered by Treq s SDN Technology We wanted to give customers the ability to provision private enterprise networks the same way they would the cloud. The customer can come in and get a collo rack with a patch panel at the top that plugs them into the Pacnet network. They can at that point start provisioning private networks throughout Asia at increments of [as little as] one hour, and [ranging] from one megabit to one gig. 16 Source: Techtarget.com, Pacnet combines SDN and NFV to sell bandwidth-on-demand services, November 19, 2014

17 PEN Case Study Pricing Calculator Using an easy to use portal, Pacnet s customers can quickly calculate their network cost with a flexible pricing model, paying only for what they use 17 Source:

18 PEN Case Study Benefits Investment Before Fixed, up-front - CapEx After Pay as you go - OpEx Time to Revenue days Minutes Network Utilization 25% utilization 90% utilization Services Model Differentiated SLAs Network Recovery Application Awareness Fixed to hardware, pricing differentiation Not allowed with fixed configuration Standard fault recovery One size fits all Software programmable services offering Flexible allocation of network - bandwidth, cost, latency, jitter Pre-determined fault recovery Dynamic applicationspecific SLA 18

19 Transaction Rationale 1 2 Unique Focus on SDN Application Optimization Strategic to Sonus SBC and Policy Real-time Capabilities Validated Business Model with Rapid ROI Combination Creates New Architecture for Service Delivery

20 Sonus + Treq Expanded Capabilities Treq Labs SDN solution, combined with Sonus SBC and Policy capabilities, creates new architecture for service delivery Sonus Real-time application knowledge Treq IP Control & Data Plane knowledge Sonus + Treq delivers unparalleled application layer network intelligence driven by real time network analytics 20

21 Transaction Rationale 1 2 Unique Focus on SDN Application Optimization Strategic to Sonus SBC and Policy Real-time Capabilities Validated Business Model with Rapid ROI Combination Creates New Architecture for Service Delivery

22 Intelligent Session Delivery Architecture Real-Time Application Domain Application Layer Real-Time Portal Treq SDN Intelligence Mobile Analytics SIP Sonus Real-Time SIP and Web Control Policy UC IWF Security WEB Fixed-Line Analytics Virtualized Real-Time Control SDN Control Plane Audio/Video/UC Media Audio/Video/UC Media SDN-Enabled IP Transport Fabric 22

23 Appendix

24 What is SDN and an SDN Controller? SDN (Software Defined Networking) refers to a softwarebased architecture that separates and virtualizes the control plane from the data plane (or forwarding plane). Software-defined architectures virtualize the intelligence that determines how the network should behave. With a software-defined architecture switch, configurations are controlled from an intelligent console, rather than from each individual switch, which is more efficient and allows organizations to have far greater control over the way the network behaves. SDN controller is an application in software-defined networking (SDN) that manages flow control to enable intelligent networking. SDN controllers are based on protocols, such as OpenFlow, that allow servers to tell switches where to send packets. 24

25 What is NaaS? Network-as-a-Service (NaaS) is a software-based business model which moves the network into the cloud and delivers network services over the Internet on a pay-per-use or subscription basis. Traditional Networks Dedicated network Hardware-based solution Inefficient Customized management Lossy Limited network feedback Costly to run Static NaaS Benefit of dedicated network in shared environment Software-based solution Efficient Leverages industry standards Higher QoS Comprehensive network feedback Lower opex Increased agility 25