Technology mogul Sir Terence Matthews figures his move into the small but growing Internet telephony industry will help him repeat his past successes.
And he hopes the $21.6-million merger of Vancouver-based CounterPath Solutions with NewHeights Software Corp. will help him tap young markets before others can.
"This is a time in this industry where you get early mover advantage. If you're in early, you gain very large profits before someone else can get in," Sir Terence said in an interview at CounterPath's Vancouver headquarters.
Sir Terence, who is also the chairman of Mitel Networks Corp. and March Networks Corp., has gained a reputation for striking it rich in what he feels are underdeveloped niches in the sector - a category he feels "softphones" falls into. Both companies make session-initiated protocol softphones - simply put, software that allows a person to make a telephone call over the Internet.
While NewHeights develops that software for corporate clients, CounterPath makes consumer softphones for more than 250 companies, including Vonage, AT&T, BT Group, Alcatel-Lucent and Deutsche Telekom.
CounterPath's $16.1-million all-stock deal for NewHeights closed on Aug 2. The new company will be called CounterPath.
NewHeights was founded by Sir Terence's son, Owen, in 1998. In return, Sir Terence's private equity firm, Wesley Clover, invested almost $6-million in CounterPath.
Even though his main office is in Kanata, Ont., he says he plans to keep close tabs on his new investment.
"I'm not a passive investor and I won't be a passive chairman in CounterPath," Sir Terence said.
His latest move comes at a time when telecom companies are nervously eyeing new voice over Internet offerings from companies like Skype and Google, fearing they might siphon away their customer base.
In order to keep their customers, telecom providers that offer voice over Internet protocol services need to get them attached to their product. And it is the actual softphone - the bells, whistles and features that appear on a user's screen - that is being banked on to create customer loyalty. After all, Sir Terence said when discussing his new venture, it's all about the user.
Though both NewHeights and CounterPath have yet to turn a profit, Sir Terence said his new company is approaching the break-even point. "Good business is about having the right technology and that automatically means at the right time when decisions are being made, and we've got it," he said.
Ronald Gruia, a telecom analyst for Frost & Sullivan in Toronto, says the merger of NewHeights and CounterPath is extremely timely.
While CounterPath has an established base with telecom carriers, Mr. Gruia said, NewHeights' technology was more sophisticated - allowing people to drag-and-drop a set of names into the program and instantly start a conference call, for example.
"I think the main idea here is to take that base that CounterPath has and then allow the NewHeights software to move up the stack and sort of create extra value in those accounts and win some new accounts," he said.
Mr. Gruia said he expects similar acquisitions of softphone makers such as Ottawa-based FirstHand Technologies to start occurring as the market begins takes off.