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1 Network Functions Virtualization February 24, 2014 By: Ryan Koontz, Managing Director of Research Introduction One of our primary investment theses for the next few years revolves around the movement of critical computing functionality from specialized hardware into software that can run on low cost, industry standard compute servers. This shift began in the late 80’s when Oracle delivered the first hardware independent database and is now just in the earliest stages of extending to other core system functions. The primary benefit of this move is the ability to scale capacity both up and down as needs require (by adding or removing server capacity), offering maximization of resources and significant cost savings. VMWare has built a significant business doing this for compute power and we believe dozens of new vendors will emerge in the coming 24 months offering similar capabilities around the network and storage. We believe that one of the early adopters of this capability is quickly becoming the carriers who are adopting a functionality known as Network Functions Virtualization or NFV. Cloud computing, virtualization and new approaches to networking are revolutionizing enterprise services delivery. Carriers are now eager to jump on the bandwagon to realize the same cost and network flexibility benefits by virtualizing many of the common wide area network functions. Although, it will take years to implement, we believe NFV will have a profound impact on carrier spending and the vendor landscape. What is NFV? NFV offers a new way to architect and implement Layer 4 through Layer 7 network functions in software, running on standard hardware. Due to today’s multi-core commodity servers, carriers can finally get application performance in software which historically was only found in high cost proprietary hardware. These virtual network functions can be deployed in geo distributed architectures that are resilient, flexible and elastic. Not all functions will be virtualized and we believe there remains a market for custom hardware optimized for very high performance and high throughput functions such as large aggregation switching, optical transport and switching, and in core routing. However, we do believe that outside of these applications, the majority of Layer 4 through Layer 7 network functionality will migrate to NFV over the next few years. INSIDE THIS ISSUE 1. INTRODUCTION 2. WHAT IS NFV 3. WHY IS NFV IMPORTANT 4. MARKET IMPACTS 5. NFV TRANSACTIONS SUMMARY 6. NFV MARKET MAP 7. COMPANY IMPLICATIONS 8. HOT COMPANIES 9. APPENDIX A MULTIPLES SNAPSHOT 10. APPENDIX B GLOSSARY OF TERMS

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1

Network Functions Virtualization

February 24, 2014

By: Ryan Koontz, Managing Director of Research

Introduction

One of our primary investment theses for the next few years revolves around the

movement of critical computing functionality from specialized hardware into software

that can run on low cost, industry standard compute servers. This shift began in the late

80’s when Oracle delivered the first hardware independent database and is now just in

the earliest stages of extending to other core system functions. The primary benefit of

this move is the ability to scale capacity both up and down as needs require (by adding or

removing server capacity), offering maximization of resources and significant cost

savings. VMWare has built a significant business doing this for compute power and we

believe dozens of new vendors will emerge in the coming 24 months offering similar

capabilities around the network and storage. We believe that one of the early adopters

of this capability is quickly becoming the carriers who are adopting a functionality

known as Network Functions Virtualization or NFV.

Cloud computing, virtualization and new approaches to networking are revolutionizing

enterprise services delivery. Carriers are now eager to jump on the bandwagon to realize

the same cost and network flexibility benefits by virtualizing many of the common wide

area network functions. Although, it will take years to implement, we believe NFV will

have a profound impact on carrier spending and the vendor landscape.

What is NFV?

NFV offers a new way to architect and implement Layer 4 through Layer 7 network

functions in software, running on standard hardware. Due to today’s multi-core

commodity servers, carriers can finally get application performance in software which

historically was only found in high cost proprietary hardware. These virtual network

functions can be deployed in geo distributed architectures that are resilient, flexible and

elastic.

Not all functions will be virtualized and we believe there remains a market for custom

hardware optimized for very high performance and high throughput functions such as

large aggregation switching, optical transport and switching, and in core routing.

However, we do believe that outside of these applications, the majority of Layer 4

through Layer 7 network functionality will migrate to NFV over the next few years.

INSIDE THIS ISSUE

1. INTRODUCTION 2. WHAT IS NFV 3. WHY IS NFV IMPORTANT 4. MARKET IMPACTS 5. NFV TRANSACTIONS

SUMMARY 6. NFV MARKET MAP 7. COMPANY IMPLICATIONS 8. HOT COMPANIES 9. APPENDIX A – MULTIPLES

SNAPSHOT 10. APPENDIX B – GLOSSARY OF

TERMS

2

Common Network Functions That Will Be Virtualized

NFV and Software Defined Networking (SDN) are complementary and drive similar benefits, but address very different networking

applications. NFV is the virtualization of network functions, where software defined networking (SDN) is the separation of the control

plane and forwarding / data plane to centralize and automate the control of network behavior. Once network functions are virtualized,

they can be dynamically deployed across the carrier network, necessitating an SDN based centralized control mechanism which is an

operational must in programing and automating the network.

Why NFV is Important

Carriers are facing a serious dilemma that is forecasted to grow increasingly worse over the next decade. The fundamental issue is that growth in network traffic and the corresponding cost is outpacing growth in revenue, which is unstainable. Carriers see NFV as critical to addressing long term network cost reductions and accelerating the speed of new revenue generating services delivery.

IMS

CDN

DNS PCRF / Policy

EPC

Load Balancing

BRAS

Firewall DPI

SBC

WanOp

NAT

NFV

• Virtualize network function in software - Virtual Network Function (vNF)

• Run on standard hardware

• Run on virtual machine

• High Performance

SDN

• De-couple control plane from forwarding / data plane

• Centralize control plane

• Run on standard hardware

• Open APIs

• Programmability

Orchestration

• Unified multi-vendor ecosystem

• Open standards

• OpenSource (OpenStack)

• Policy-driven flows

Carrier NFV

Virtualization Service and Network Abstraction

3

The Carrier Dilemma

As carrier revenue growth flattens, the cost to grow the network footprint and capacity is becoming unmanageable. Adding subscribers has

quickly become a game of share shift among companies – which is driving marketing costs higher. Carriers need to look to network

operations in order to sustain profitability growth in the face of saturation. Carriers are particularly eager to drive capex down and take

advantage of the abundance of cheap higher performance computing to achieve that goal. By using standard servers, they not only reduce

the equipment cost, but importantly reduce size and power requirements.

Carriers see the need for increased network flexibility and application awareness as key to remaining competitive. Further, they must

drastically reduce the time to market for new revenue generating features by breaking the bond equipment suppliers have over them with

proprietary designs that are expensive and slow to innovate. Multi-year network upgrade cycles become much more agile and are based on

incremental revenue driven network and service enhancements.

Market Impacts

NVF is a key carrier priority and the tier 1 carriers are not only in support of, but also leading the effort to standardize and implement

solutions over the coming quarters. NFV is in several carrier trials and many vendors have committed to key NFV focused roadmaps. We

expect to see continued trials in 2014 moving towards production deployments over the next few years.

NFV not only represents a major change to how L4-L7 functions are implemented, but it will likely change the vendor landscape and

pricing. Over a five year horizon, we see carrier capex and opex declining as they try to control costs and while they increasingly shift

spending away from expensive networking hardware to software based solutions. We believe by 2018, software based networking solutions

will have taken a significant share of the traditional carrier networking hardware market, that was about $150B in 2013.

2013 2018

Global Carrier Capex

Networking Equipment ($150B Annually)

Networking HW

Software-based Networking

(NFV)

4

Carriers’ long term goals are to drive down total capex spending and significantly reduce networking equipment capex.

Key to this will be the shift from proprietary hardware base implementation to software which will lower the barrier

to entry for new equipment suppliers to enter the market and drive down pricing.

The stranglehold a handful of equipment suppliers have had that could make the large capital and R&D investments

in building expensive custom hardware platforms and silicon is now being eliminated. Many of the legacy equipment

suppliers are being forced to change their ways and now plan to offer virtual software solutions as well. However,

these solutions may see significant performance limitations as in many cases they are based on legacy telco design

principles for high availability, chassis based implementations, and not designed to take advantage of distributed

multi-core processing.

NFV represents a new opportunity for many non-networking suppliers as a new revenue source. In our discussions,

we believe many of the large tier 1 carrier considering NFV designs are not only talking to legacy suppliers on how

best to transition their networks long term, but non-traditional networking suppliers such as IBM, Amdocs and

Oracle are gaining significant mindshare and credibility in these discussions.

We have already seen NFV related M&A on the rise and as new technology suppliers enter the market, we expect to

see a significant consolidation to occur. We expect to see non-traditional well capitalized Enterprise focused suppliers

continue to make acquisitions in the L4-L7 software networking space.

NFV Transactions (2011-2014)

Ann. Date Target Buyer Deal Size ($M) Target Description

2/15/14 Shenik Aeroflex 28.5 SDN, NFV, Cloud test and measurement

1/30/14 Trendium, Inc. JDSU - Service intelligence and performance management

1/22/14 AirWatch, LLC VMWare 1,540 Mobile device management and security

1/14/14 Corente Oracle - SDN controller for LAN and WAN

12/16/13 WANDL, Inc. Juniper 60 Network planning, management, design, optimization

12/13/13 Algorithms.io LumentData - Streaming data analysis platform

12/13/13 Skytide Citrix - CDN performance optimization

12/13/13 Newfield Wireless Tektronix - Network virtualization and predictive geo analytics

12/13/13 Cloudmeter Splunk 21 Network data analytics and user management

12/13/13 NI JDSU 200 Network Monitoring, visibility

12/13/13 Volubill CSG - Network monitoring, traffic error detection and policy

12/10/13 Cloudmeter, Inc. Splunk 21 App monitoring solution for public, private cloud

11/16/13 Bitzer Mobile, Inc. Oracle - Mobile app and data security

11/13/13 Fiberlink IBM - Mobile device and app management

11/13/13 Celcite Amdocs 130 Self-Optimized Networking, backoffice OSS / IT mobile functions

11/13/13 Aircom Teoco - Mobile network planning and network optimization

11/13/13 HighCloud Security HyTrust - Virtualization and cloud security management

11/6/13 Insieme Networks, Inc. Cisco 863 SDN infrastructure

10/13/13 Now Factory IBM - Customer experience analytics and management

10/13/13 Cmphonix Untangle Sys - Network resource monitoring and performance management

10/13/13 Virtela NTT 525 WAN, SDN, network optimization services

10/13/13 Netoptics Ixia 190 Network Monitoring, visibility

10/13/13 Aexio Infovista

Network traffic analytics and management

5

Ann. Date Target Buyer Deal Size ($M) Target Description

10/3/13 Xtify, Inc. IBM - Apps monitoring and geolocation services

9/13/13 Bugsense Splunk - Mobile app performance analytics

9/13/13 Atix Amdocs 120 Self-Optimized Networking

7/23/13 Sourcefire, Inc. Cisco 2,395 Network security and virtual firewall and IPS

6/20/13 Composite Software, Inc. Cisco 180 Data virtualization solutions

6/4/13 SoftLayer Technologies, Inc. IBM 1,977 Cloud services

3/13/13 Nimbula, Inc. Oracle - Cloud OS, infrastructure software

3/13/13 Tekelec Oracle - IMS diameter signaling

3/8/13 Arieso Ltd. JDSU 85 Subscriber experience monitoring and geolocation services

2/13/13 Acme Packet Oracle 1,700 SBC, IMS diameter signaling

2/13/13 Intucell Cisco 475 Self-Optimized Networking

2/13/13 LineRate F5 125 Virtual LB, acceleration, SSL offload and traffic management.

2/11/13 Virsto Software Corporation VMWare 185 Storage hypervisor, server virtualization

2/4/13 Webscreen Systems Limited Juniper 10 Distributed DDoS security

1/29/13 Cognitive Security s.r.o. Cisco - Network monitoring and security

1/13/13 Neuralitic Guavus - Mobile data monetization and marketing analytics

1/13/13 Vineyard Procera 28 Policy Enforcement for Enterprise DPI

12/18/12 CREDANT Technologies, Inc. Dell Inc. - Mobile data protection management

12/18/12 BroadHop, Inc. Cisco - Mobile network monitoring and policy control

12/13/12 DataRaker Inc. Oracle - Utility network monitoring and analytics

12/12/12 Contrail Juniper 176 SDN controller and virtual routing and security

12/12/12 Endance Emulex 130 Network monitoring and management

12/5/12 Zenprise, Inc. Citrix 327 Mobile device monitoring and management

11/29/12 Cariden Technologies, Inc. Cisco 141 Network monitoring and automation

11/16/12 Gale Technologies, Inc. Dell Inc. - Network and app monitoring and automation

11/15/12 Cloupia, Inc. Cisco 125 Cloud service automation

11/12/12 Vyatta Brocade 44 Virtual routing and security

11/12/12 Onpath Netscout 32 Network Monitoring, visibility

10/12/12 Opnet Riverbed 1,000 Applications Monitoring, visibility

10/4/12 vCider, Inc. Cisco - Virtual cloud networking

9/24/12 Butterfly Software Ltd. IBM - App and data monitoring and optimization

8/7/12 Pattern Insight Inc. VMWare - Machine to machine analytics

8/7/12 Apere, Inc. Citrix - Network security

7/30/12 Xsigo Systems, Inc. Oracle - Virtual infrastructure

7/13/12 Virtuata, Inc. Cisco - Security software for virtual machines

7/12/12 Nicira VMWare 1,260 SDN Controller and virtual network overlay

7/12/12 Ascade AB CSG 19 Network monitoring and automation of voice services

7/2/12 DynamicOps, Inc. VMWare - Operations virtualization

7/2/12 BreakingPoint Systems Ixia 160 Security performance testing

6/12/12 Byte Mobile Citrix 435 Mobile analytics and optimization

5/7/12 Anue Systems, Inc. Ixia 154 Network monitoring and management

6

Ann. Date Target Buyer Deal Size ($M) Target Description

5/3/12 Truviso LLC Cisco - Network monitoring and analytics

3/28/12 ClearAccess, Inc. Cisco - Subscriber monitoring and CPE management

3/13/12 SonicWALL L.L.C. Dell - Network security

2/24/12

AppAssure Software, Inc. Dell - App monitoring and replication

2/22/12 Mykonos Software, Inc. Juniper 83 App security

2/1/12

Traffix F5 130 IMS diameter signaling

1/5/12 Dyaptive Systems, Inc. JDSU 15 Mobile network monitoring and performance testing

11/21/11 Simena, LLC NetScout 21 Network monitoring and testing

10/20/11 BNI Video Cisco 99 Video monitoring and video CDN

8/26/11 PacketMotion, Inc. VMWare - Network monitoring and security

8/21/11 Axiom Systems Limited Cisco 31 Network service delivery automation

8/15/11 Crescendo Networks Ltd. F5 6 Application delivery, load balancing and optimization

7/19/11 Aptimize Limited Riverbed 34 Applications and web service acceleration

7/12/11 Cloud.com, Inc. Citrix 164 CloudStack orchestration software

6/29/11 Pillar Data Systems, Inc. Oracle 368 App aware storage solutions

6/20/11 RNA Networks, Inc. Dell - Infrastructure virtualization

6/17/11 Bridgewater Systems Amdocs 216 Mobile policy control

5/16/11 Shavlik Technologies, LLC VMWare - Cloud based network management and security

4/19/11 Telenor Connexion AB Ericsson - Machine to machine connectivity

3/27/11 Psytechnics Limited Netscout 17 VoIP, telepresence, performance management

7

NFV Acquisitions by Technology Category

Most Active Acquirers of NFV Technology (2011-2014)

2011 2012 2013

Security

Network visiblity, analytics,policy

L4-L7 Network Services

SDN / Network Infrastructure

IMS / Mobile Core

Backoffice / Orchestration

App visibility, analytics, policy

8

NFV Market Map

Carrier Network Functions Service and Network Abstraction Backoffice/IT

Mobile Core/IMS Networking Network Service (L4-L7) Security Orchestration SDN / Hypervisor

9

Company Implications

Over the next several years, we see NFV as being highly disruptive to many of the legacy service provider equipment

suppliers.

Cisco (CSCO) is most exposed. In the long term, we believe it will remain a key supplier of many of the virtual

network features, but is obviously exposed to pricing and margin pressures due to its significant enterprise proprietary

hardware business. We see the convergence of virtual networking features happening at the enterprise premises first

and CSCO will likely offer a suite of virtual features at a significantly lower price than the discrete boxes it sells to

enterprises today.

Juniper (JNPR) is modestly exposed as much of the equipment it sells to carriers is in the core routing, core security

and high-capacity edge routing which are likely to remain as custom hardware devices for years. We believe JNPR

lacks a story around NFV, but could leverage an aggressive roadmap (both organic and likely through M&A) to gain

share in pieces of the network it does not currently serve.

Ericsson (ERIC) and Alcatel Lucent (ALU) are both modestly exposed. Although both play in the IMS and should be

able to remain relevant, but their long term positions as dominant suppliers to the carrier market is becoming

precarious – especially as very large enterprise players enter the market and challenge both ERIC and ALU on wireless

network product and professional services sales.

Oracle (ORCL), Amdocs (DOX), IBM (IBM) – should benefit from this network transition. We believe these

suppliers see NFV as a good opportunity to enter the carrier networking environment as a key long term strategy to

help diversify their business and tap into the large pool of carrier network spending. We anticipate additional carrier

focused acquisitions by these players in the coming quarters.

VMWare (VMW) is a key supplier of virtualization and now overlay networking solutions for the data center, and we

believe VMW could leverage its NSX to potentially become a bigger player in the network virtualization and

centralized automation of the network.

F5 (FFIV) is a key supplier of data center and carrier load balancing products. The company hopes to expand its

carrier sales in IMS (through its acquisition of Traffix) and in network security. We believe it could establish itself as a

key player in carrier network virtualization through its own solutions and through additional M&A.

Citrix (CTXS) is a supplier of virtual application delivery and firewall functions with its industry leading Netscaler

SDX platform. CTXS has partnered with Palo Alto Networks (PANW) and CSCO to offer virtual firewall and IPS

and we believe CTXS plans to offer several other virtual network functions from the SDX platform. We see CTXS as

an acquirer in this market segment.

RedHat (RHT) is supplier of OpenStack products, a key open source orchestration platform for compute, storage and

networking in the data center and carrier network.

Below, we have highlighted several smaller public and privately-held companies we think are well positioned to see

high sales growth over the coming years and are likely acquisition targets.

10

Hot Companies

Company Description

6WIND Network performance software for OEMs delivering advanced networking functions in mobile infrastructure equipment, networking appliances, and data center networking.

A10 Networks Networking and security solutions that help organizations accelerate, optimize, and secure their applications.

Affirmed Networks Network virtualization solutions for mobile broadband and M2M networks.

Allot (ALLT) Internet protocol DPI and service optimization solutions.

Barefoot Networks Merchant silicon solutions designed for low cost, high performance white box switching

BTI Packet / Optical infrastructure and service solutions for service providers and cloud providers.

Calsoft Labs System integrator and technology consulting and product engineering services globally with focus on Networking infrastructure, Cloud infrastructure, and Mobility.

Connectem M2M connectivity and virtual mobile EPC solutions.

ConteXtream Network virtualization framework for cloud service providers, hybrid clouds, access providers, and private clouds and enterprises.

Cumulus Networks Open Linux based networking operating system.

Cyan (CYNI) Packet / Optical networking solutions for service providers.

Embrane Multi-service software architecture that delivers network services to enterprises and service providers.

Gigamon (GIMO) Network visibility and policy control

Guavus SP network visibility and analytics

Illumio Virtual application security.

Lemko Software and hardware based mobile broadband operating systems for wireless communication networks.

Lyatiss Application defined networking solutions that offer networking analytics and capabilities to cloud infrastructure users.

Mavenir (MVNR) Software-based networking solutions for mobile networks to deliver IP-based voice, video, rich communications and enhanced messaging services.

Metaswitch Networks Voice, IMS and next gen networking functions for service providers.

Midokura Network virtualization software solutions.

Netsocket Automation applications running on a completely virtualized network infrastructure for distributed enterprise branch offices/small to medium-sized businesses and the Service Providers

Overture Networks Ethernet edge and aggregation solutions to service providers, network operators, and enterprise customers.

Pertino

Cloud-based, Network-as-a-Service platform that combines the power and pervasiveness of the cloud with overlay network virtualization, software-defined networking (SDN), service-oriented network functions virtualization (NFV), and real-time orchestration.

Pica8 Open networking platforms based on merchant silicon, that are easy to program, robust to operate, and low-cost to procure.

Plexxi Content and resource aware, dynamic networking.

Pluribus Hardware accelerated next-generation, virtualized switches and a distributed Netvisor offering a fully programmable network fabric provide true network virtualization for cloud and enterprise data-centers.

Qosmos Distributed network intelligence (NI)/deep packet inspection (DPI) technologies for network monitoring and policy control.

Razorsight Software-as-a-service based profit analytics solutions for service providers.

Saisei Networks IP flow-based Internet traffic management solutions for wireline and wireless/mobile broadband service providers and enterprises. worldwide.

Silver Peak Systems Virtual and physical wide area network (WAN) optimization solutions.

Sonus (SONS) Voice and IMS network solutions for service providers and enterprises.

Tail-f Overlay OS software to enable programmability and automation of network elements.

11

Company Description

VArmour Network security for virtual network overlays.

Vello Systems OpenFlow enabled software defined application platform allows the network to act as a dynamic pool of resources for ever-changing application requirements to speed deployment and increase agility.

Vistapointe Networks Mobile analytics tools to effectively monitor subscriber, device and network parameters to streamline operations and enhance marketing initiatives.

Xpliant Merchant silicon solutions designed for low cost, high performance white box switching

12

Appendix A - Multiples Snapshot

Company Description Market

Cap ($M) EV

($M) EV/Revenue

(2014E) 6WIND 6WIND S.A. provides a commercial software solution that solves network performance

challenges for OEMs. - - -

A10 Networks (ATEN)

A10 Networks provides networking and security solutions that help organizations accelerate, optimize, and secure their applications.

- - -

Accenture (ACN) Accenture provides management consulting. $49,736 $45,721

1.5x

Aeroflex (ARX) Aeroflex offers network test and measurement solutions. 689 1,240 2

Affirmed Networks

Affirmed Networks operates as a stealthy telecom startup. - - -

Alcatel Lucent (ALU)

Alcatel Lucent provides Internet protocol (IP) and cloud networking. 11,327 13,598

0.6

Allot (ALLT) Allot develops, markets, and sells intelligent Internet protocol service optimization solutions.

525 410 3.7

Amdocs (DOX) Amdocs Limited provides software and services for communications, media, and entertainment industry service providers.

6,772 5,560 1.5

Arista Networks Arista Networks provides cloud networking solutions for datacenter and computing environments.

- - -

Barefoot Networks

Barefoot Networks provides merchant silicon solutions designed for low cost, high performance white box switching - - -

BigSwitch SDN controller and OpenFlow switch fabric - - -

BroadSoft (BSFT)

BroadSoft provides software and services that enable mobile, fixed line, and cable service providers to deliver hosted or cloud based unified communications.

852 785 4.0

Brocade Communications Systems (BRCD)

Brocade Communications Systems provides Internet protocol based networking solutions and storage area networking (SAN) solutions.

4,098 3,710 1.7

BTI BTI Systems Inc. develops and delivers infrastructure and service enablement solutions for service and content providers.

- - -

Calsoft Labs Calsoft Labs is a system integrator and offers technology consulting and product engineering services globally with focus on Networking infrastructure, Cloud infrastructure, and Mobility. - - -

Ciena (CIEN) Ciena Corporation provides communications networking equipment, software, and services that support the transport, switching, aggregation, and management of voice, video, and data traffic worldwide.

2,270 3,160 1.5

Cinarra Systems Cinarra Systems develops analytics software architecture which processes large amounts of operator data and build in real time data insights that are then be monetized using mediation platform.

- - -

Cisco Systems (CSCO)

Cisco Systems designs, manufactures, and sells Internet protocol (IP) and related products.

116,556 84,593

1.8

Citrix Systems (CTXS)

Citrix Systems provides cloud computing solutions. 9,995 9,260 2.9

Connectem Inc. Connectem designs and develops wireless device solutions. - - -

ConteXtream ConteXtream provides cloud-based network virtualization framework for cloud service providers.

- - -

Cumulus Networks

Cumulus Networks engages in making networks invisible for Internet scale applications. - - -

Cyan (CYNI) Cyan provides various carrier-grade networking solutions that transform legacy networks into open high-performance networks.

166 94 0.9

Dell Dell is an information technology company, and provides a range of technology solutions.

- - -

Dialogic (DLGC) Dialogic provides various communication products and technologies to wireless and wireline service providers for the transport, transcode, manage, and optimize video, voice, and data traffic.

16 97 -

13

Company Description

Market Cap ($M)

EV ($M)

EV/Revenue (2014E)

Embrane Embrane designs and develops a multi-service software architecture that delivers network services to enterprises and service providers.

- - -

EMC (EMC) EMC Corporation develops, delivers, and supports information infrastructure and virtual infrastructure technologies, solutions, and services.

47,793 45,773

1.9

Emulex (ELX) Emulex Corporation provides network connectivity, monitoring, and management products for networks that support enterprise, cloud, government, and telecommunications.

591 536 1.1

Ericsson (ERIC) Ericsson provides telecommunications equipment and services to mobile and fixed network operators.

38,922 31,842

0.9

Extreme Networks (EXTR)

Extreme Networks provides network infrastructure equipment and services for enterprises, data centers, and service providers.

665 466 0.7

F5 Networks (FFIV)

F5 Networks provides application delivery networking technology that secures and optimizes the delivery of network-based applications, and the security, performance, and availability of servers and other network resources.

8,096 7,518 4.3

Fujitsu Limited (FJTSY)

Fujitsu is an information and communication technology (ICT) company, provides a range of technology products, solutions.

11,641 16,264

0.4

Genband Genband develops multimedia and cloud communications solutions for fixed and mobile service providers, cable operators, wholesale market.

- - -

Gigamon (GIMO)

Gigamon designs, develops, and sells products and services that provide customers visibility and control of network traffic.

973 867 4.9

Guavus Guavus designs and develops decision making solutions for the telecommunications industry.

- - -

Hewlett-Packard Company (HPQ)

HP together with its subsidiaries, provides products, technologies, software, solutions, and services to individual consumers and SMBs.

54,076 64,994

0.6

Huawei Huawei engages in the research, design, development, manufacture, marketing, and export of toy series that integrate both educational and entertainment functions.

581 513 -

Illumio Illumio offers virtual application security solutions. - - -

Infinera (INFN) Infinera provides optical networking equipment, software, and services to communications service providers, Internet content providers, cable operators, and subsea network operators.

1,013 825 1.3

International Business Machines (IBM)

IBM provides information technology (IT) products and services. 187,679 216,468

2.2

Ixia (XXIA) Ixia provides converged Internet protocol (IP) network validation and network visibility solutions.

940 886 1.7

JDS Uniphase (JDSU)

JDSU provides communications test and measurement solutions. 2,977 2,436 1.3

Juniper Networks (JNPR)

Juniper Networks designs, develops, and sells products and services that provide network infrastructure for networking requirements of service providers.

13,514 11,667

2.3

Lemko Lemko is an IP software company that develops mobile broadband operating systems for wireless communication networks.

- - -

Lyatiss Lyatiss develops application defined networking solutions that offer networking analytics and capabilities to cloud infrastructure users. - - -

Matrixx Software Matrixx Software delivers real-time charging and balance management for any combination of payment, access technology and service.

- - -

Mavenir (MVNR)

Mavenir develops software-based networking solutions for mobile networks to deliver IP-based voice, video, rich communications and enhanced messaging services. 335 363 3

Mellanox Technologies (MLNX)

Mellanox produces and supplies semiconductor interconnect products for computing, storage, and communications applications in the high-performance computing, Web 2.0

1,563 1,239 2.5

Metaswitch Networks

Metaswitch Networks provides communication services and solutions to business and residential customers.

- - -

14

Company Description

Market Cap ($M)

EV ($M)

EV/Revenue (2014E)

Midokura Midokura develops network virtualization software solutions. - - -

NetApp (NTAP) NetApp engages in design, manufacture, and marketing of networked storage solutions. 14,348 10,071

1.5

NetScout Systems (NTCT)

NetScout Systems designs, develops, manufactures, markets, licenses, sells, and supports unified service delivery management, service assurance, and application and network performance management solutions.

1,440 1,295 3.0

Netsocket Netsocket develops automation applications that run on a completely virtualized network infrastructure for distributed enterprise branch offices/small to medium-sized businesses and the Service Providers - - -

Nokia (NOK) Nokia operates as a mobile communications company. 25,166 21,923

1.3

Oracle (ORCL) Oracle develops, manufactures, markets, hosts, and supports database and middleware software, applications software, and hardware systems.

161,727 149,397

3.8

Overture Networks

Overture Networks engages in the development, manufacture, and marketing of carrier Ethernet edge and aggregation solutions to service providers, network operators, and enterprise customers.

- - -

Pertino

Pertino offers a cloud-based, Network-as-a-Service platform that combines the power and pervasiveness of the cloud with overlay network virtualization, software-defined networking (SDN), service-oriented network functions virtualization (NFV), and real-time orchestration. - - -

Pica8 Inc. Pica8 develops and manufactures network switches. - - -

Plexxi Plexxi offers solutions for content and resource aware, dynamic networking. - - -

Pluribus

Pluribus develops hardware accelerated, next-generation, virtualized switches and a distributed Netvisor offering a fully programmable network fabric provide true network virtualization for cloud and enterprise data-centers.

- - -

Procera Networks (PKT)

Procera Networks provides intelligent policy enforcement solutions based on deep packet inspection technology that enable mobile and broadband network operators and entities to manage and control their private networks.

231 123 1.5

Qosmos SA Qosmos provides network intelligence (NI)/deep packet inspection (DPI) technologies that identify and analyze data traveling over networks in real time.

- - -

Radcom (RDCM)

Radcom provides service assurance and customer experience monitoring solutions. 41 40 -

Razorsight Razorsight Corporation offers SaaS based profit analytics solutions for communications service providers.

- - -

Riverbed Technology (RVBD)

Riverbed Technology provides solutions to the fundamental problems associated with information technology (IT) performance across wide area networks (WANs).

3,206 3,272 2.8

Saisei Networks Saisei Networks provides IP flow based Internet traffic management solutions for wireline and wireless/mobile broadband service providers, cable operators, government agencies, schools and universities, and enterprises.

- - -

Samsung Electronics (SSNLF)

Samsung is engaged in consumer electronics, information technology and mobile communications, and device solutions businesses.

150,891 110,892

0.5

Silver Peak Systems

Silver Peak Systems develops wide area network (WAN) optimization solutions. - - -

Sonus Networks (SONS)

Sonus Networks provides networked solutions for communications service providers and enterprises.

834 636 2.1

Spirent (SPT) Spirent develops network and device testing and tools for service management and field test to improve troubleshooting and quality. 653 406 0.9

Splunk (SPLK) Splunk provides software solutions that provide real-time operational intelligence. 8,588 8,236 22.1

Tail-f Systems Tail-f Systems provides software solutions and tools that enable developers of network management systems to build or extend their applications.

- - -

VArmour

Network security for virtual network overlays. - - -

15

Company Description Market

Cap ($M) EV

($M) EV/Revenue

(2014E)

Vello Systems

Vello Systems offers an OpenFlow enabled software defined application platform allows the network to act as a dynamic pool of resources for ever-changing application requirements to speed deployment and increase agility.

- - -

Veryx Veryx develops testing solutions for SDN, Carrier Ethernet, Layer 2, IPv4, IPv6, Network Management and Time Synchronization technologies. - - -

Vistapointe Networks

Vistapointe Networks provides mobile analytics tools to effectively monitor subscriber, device and network parameters to streamline operations and enhance marketing initiatives.

- - -

VMWare (VMW) VMware provides virtualization infrastructure solutions. 37,905 32,180

5.3

Windriver Windriver offers network intelligence, content inspection and content acceleration solutions. - - -

Xpliant Merchant silicon solutions designed for low cost, high performance white box switching - - -

16

Appendix B – Glossary of Terms

NFV – Network Functions Virtualization. A software based implementation of networking functions typically implemented

in proprietary hardware.

SDN – Software Defined Networking. Decoupling of control plane from forwarding plane in network elements. All or part

of the control plane is centralized for better network programmability and automation.

NAT - Network Address Translation. A Technique to reuse IP addresses between private and public networks for preserving

scarce Internet IP addresses.

IMS – IP Multimedia Service. An architectural framework for delivering IP multimedia services (voice, data, video) across

networks, especially in mobile networks.

DNS - Domain Name System. Translates human-friendly host names for computers, web sites, services, or any resource

connected to the Internet to numbered IP addresses.

Load Balancing - Distribution of L4 –L7 workloads across compute, storage and networking resources to optimize resource

use, maximize throughput, minimize response time.

Firewall – A network element that examines network traffic flows and acts as a barrier between a trusted, secure internal

network and other networks.

DPI – Deep Packet Inspection. A network element that examines IP traffic flows and their contents to provide traffic

analysis, traffic blocking, or to apply policy to traffic flows.

PCRF - Policy and Charging Rules Function. A software based network element that determines policy rules and enforces

them in an IMS multimedia network.

BRAS - Broadband Remote Access Server. A network element that aggregates user sessions, applies policy rules and routes

traffic to and from broadband remote access devices such as digital subscriber line access multiplexers (DSLAM) on an

Internet service provider's (ISP) network.

EPC – Evolved Packet Core. A set of network elements responsible for mobile subscriber authentication, routing of voice

traffic and data traffic in 4G LTE mobile networks. The EPC is composed of four network elements: the Serving Gateway

(Serving GW), the PDN Gateway (PDN GW), the MME and the HSS. The EPC is connected to the external networks, which

can include the IMS network.

SBC – Session Border Controller. A network element that sits between different carrier networks or within a single carrier

network between the access and core networks that offer Voice over IP (VoIP) services. SBCs are used in the set-up, tear-

down and to apply policy to VoIP calls.

WanOp – Wide Area Network (WAN) Optimization. A set of techniques applied to IP traffic to optimize throughput,

bandwidth, latency, and congestion.

17

CDN – Content Delivery Network. A set of highly distributed network elements that optimize and serve content to end-

users with high availability and high performance. CDNs serve a wide variety of content including web pages, downloadable

objects (media files, software, documents), applications (e-commerce, portals), and live streaming video.

18

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