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HP Acquires Israel’s ConteXtream To Liberate Telcos From Hardware

Hewlett Packard is very bullish on Network Functions Virtualization and they acquired the Israeli company to accelerate the “journey” of their clients to the cloud In the past, every time a telecom services provider like a cable company or Internet service provider wanted to upgrade their routers, load balancers or firewalls, they had to purchase new hardware. But in an age of increased network traffic and declining margins, telecom companies need to be more agile. As a result, they are increasingly moving away from hardware to virtual machines in the cloud. On Tuesday, HP announced that it has acquired Israel’s ConteXtream with the goal of accelerating telecom companies’ “journey” to Network Functions Virtualization (NFV for short). ConteXtream describes itself as “Subscriber Aware Carrier-SDN Fabric for Network Function Virtualizaton.” HP plans to integrate the newly acquired company into its Communications, Media and Entertainment Solutions division. Although the acquisition price was not made public, it is estimated to be in the tens of millions of dollars. Why NFV is a very big deal In a blog post announcing the acquisition, HP describes NFV as “one of the most significant developments in the communications industry.” Just as large enterprises went from dedicated servers and large mainframe machines to cloud-based services, the networking world has been undergoing a similar transition, says HP’s senior VP for telecom Saar Gillai. “In the networking world there are countless functions — firewalls, caching, all kinds of activities — and we have all kinds of monolithic hardware boxes to do these things. NFV is about saying, ‘Why can’t we put these various functions in the cloud? Why does each function need to be on specialized and dedicated hardware?’” The benefit, says Gillai, is that telecom companies could roll out services or service updates weekly as opposed to every few years. What will happen to ConteXtream after the deal ConteXtream was founded in 2006 by Sharon Barkai, Nachman Shelef and Eric Benhamou. In the past, Barkai founded Sheer Networks, which Cisco acquired in 2005. He also founded Xeround Systems. Nachman Shelef founded NiceCom, was a vice president at 3Com (which acquired NiceCom), and was a general partner and co-founder of the venture capital fund Benchmark Israel. Eric Benhamou has been the chairman of Palm and 3Com. Since its founding, ConteXtream has raised $23.8 million in three rounds of investment. The company’s investors include Norwest Venture Partners, Gemini Israel Ventures, Sofinnova Ventures, as well as founder Eric Benhamou’s Benhamou Global Ventures. In 2010, as part of the company’s second round of funding, the existing funders were joined by the investment arms of two telco companies Verizon Ventures and Comcast Ventures. Once the deal is complete, Nachman Shelef will continue to direct the ConteXtream department at HP and he will be directly subordinate to Saar Gillai, SVP/GM Communications Solutions Business and Global Leader Telco at Hewlett-Packard. According to HP, the NFV market is expected to grow to $11 billion by 2018. Yaneev Avital contributed reporting