Sandvine: The DPI Market's Top Vendor

All eyes are on Sandvine Corp. (SNVNF.PK) following Thursday's acquisition of Sandvine competitor, Ellacoya Networks, by Arbor Networks, says Thomas Weisel analyst Kris Thompson.

Writing in a note to clients, Mr. Thompson said that Sandvine is now clearly the "main prize" in the DPI solutions sector, and that he expects speculation of a takeover to resurface as the demand for DPI (deep packet inspection) solutions accelerates in the telco and wireless space in 2008.

Mr. Thompson wrote:

We believe Sandvine's market opportunity is larger as an agnostic technology vendor that can be sold into the global service provider market, either through its direct sales force or its growing channel partners.

However, we expect the large network access vendors are taking a hard look at acquiring their way into the DPI market.

The analyst mentioned that Alcatel-Lucent (ALU) has previously expressed intentions to develop its own DPI technology, but added DPI development efforts by new entrants will be too late to benefit from the lucrative DPI vendor selection activity in 2008 and early 2009.

Mr. Thompson added that while the combined entity of Ellacoya and Arbor will become marginally stronger in the service provider market, Sandvine remains the clear cut, pure play DPI vendor in this market. He maintained his "overweight" rating on the stock and left his C$6 price target unchanged.