Stoke snags $5M Samsung investment, says no rush for IPO

Vikash Varma, president and CEO at mobile broadband gateway provider Stoke, says his company doesn't need the $5 million that Samsung's venture capital arm just invested in it, but Stoke is nonetheless glad to accept the cash and build a closer partnership with the South Korean vendor.

Stoke is profitable and has been growing up to three-fold every year for the past three years, Varma told FierceBroadbandWireless. "We certainly do not need the $5 million from Samsung for operational reasons. This is purely a strategic investment to allow them to have a closer relationship with Stoke as we work together to address the LTE market," he said.

Stoke says three of the top infrastructure players are bidding on its gateway technology as an integral part of their solution sets. The strategic investment from Samsung will not keep stoke from dealing with other infrastructure vendors on a non-exclusive basis, said Varma.

Stoke appears flush with cash. In January 2011, the company announced it had received $17 million in fully subscribed Series E funding, bringing its total funding at that point to some $92 million. Investors in that round included Focus Ventures, DAG Ventures, Integral Capital Partners, Pilot House Ventures, Net One Systems, DoCoMo Capital Ltd, Mobile Internet Capital, Sequoia Capital and Kleiner Perkins Caufield & Byers.

With so much venture capital funding, an obvious question concerns when Spoke might make an initial public offering to pay back its investors. "Our focus right now is building a credible business. If you're successful doing that, an IPO's a definite possibility and probably the logical path to take. We know that companies in our space, if they are immensely successful, are rewarded with enormous valuations," said Varma.

But he cautioned that in this age of market volatility, Stoke is in no rush to launch an IPO or consider engaging in M&A activity.

Partnering with Samsung should have long-term benefits for Stoke. Samsung has stated its ambition to become one of the top three LTE infrastructure providers worldwide, and "among the equipment vendors, they're probably the most financially stable," said Varma.

Samsung also has an extensive LTE small cell portfolio, which can be used with Stoke's gateways in a combined solution, he said.

Though security aggregation is needed in the macrocell environment, the expected widespread deployments of heterogeneous networks using small cells are behind an expanded drive for security gateways, largely because it is much more difficult to physically secure multitudes of small cells, said Varma. "In LTE, is it imperative to have virtual encrypted tunnels from every base station back to the core. Stoke makes the highest density gateways in the market that do the secure, encrypted tunnels," he said.

The company's Stoke Session Exchange 3000 (SSX-3000) eNodeB aggregation security gateway has been deployed in NTT DoCoMo's LTE network in Japan for the past two years. "It's the single largest security gateway installation in the world," Varma said.

Stoke says its SSX Multi-Service Gateway is used in LTE networks to deliver multiple critical, concurrent functions emerging between the LTE RAN and evolved packet core, thus keeping down the network device count while securing core network services and subscriber communications. The vendor claims it is the market-share leader in deployed LTE security aggregation, and its technology is currently in trials in Asia, Europe and North America. Further, the company says its technology is being bid in six new LTE security gateway deals that did not exist just four months ago.

Stoke's competitors include Cisco Systems, Juniper, Acme Packet, Alcatel-Lucent and Ericsson.

For more:
- see this Stoke release

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