AudioCodes has experienced its 20th consecutive growth quarter in Q3 2006. There has been major growth in all Business Lines including the Technologies division, especially in the Blade Business Line in the US and an increase in the Chips Business Line. The Networking division enjoyed growth in media gateways and AudioCodes enjoyed design wins with OEMs, Service Providers and Next Gen VoIP networks.

The integration of Nuera strengthened AudioCodes' position in the cable market and in Asia. Similarly, Netrake enabled AudioCodes to gain entry into the Session Border Controllers and Security Gateway markets. In addition we gained employees from both companies and their respective management has been allocated responsibilities. AudioCodes now provides additional support, both in the field and remotely. Professional as well as on-site integration of media gateway, media server and SBC services that will help System Integrators and operators.

There are a number of market trends that are beneficial to AudioCodes:

There is significant progress in UMA. We are beginning to observe Service Providers deploying EVDO Rev A. Finally, progress can be seen in WIMAX. These trends are all positive for AudioCodes as it means additional voice compression along with more complex types of compression and other vocoder features, i.e. quality management.

We are creating more interoperability and certification partnerships for Mediant™ 1000 and 2000 products. An example of this is that of Broadsoft and AudioCodes which have already been deployed into Service Provider networks. VARs are deploying our products based on recent announcements with Avaya, Microsoft, Nortel, Digium and more.

AudioCodes is teaming up with different vendors to offer System Integrators and Value Added Resellers (VARs), a complete IP-PBX solution which is based on open, standards based, interoperable elements. The AudioCodes – Partner IP-PBX solution is created by integrating the benefits of the AudioCodes’ Mediant™ 1000 Media Gateway with an internal OSN (Open Solutions Network) Server, with the Partner IP-PBX software. Integrating various IP-Phones and application services from independent vendors completes the solution, creating a “Best of Breed” solution that is feature rich, mature, and attractive to enterprise customers.

The integrated IP-PBX – Mediant 1000 solutions vendors include PBX vendors like 3Com & Tadiran Telecom and with new-world open-source IP-PBX vendors like Digium (Asterisk), Pingtel and SNOM (PBXnSIP).

The Blade Business Line has achieved a higher market share and is benefiting from the transition from TDM platforms to IP solutions and from Proprietory API to SIP. Our blades act as SIP media gateways on a blade and our SIP API packages are attractive solutions for migrating towards IP from proprietary APIs that are offered by smaller companies. As a result of these successes and trends, AudioCodes is continuing to invest significantly in Transcoding and SIP for blades, media servers, media gateways and Session Border Controllers. AudioCodes’ best-of-breed network equipment is a key component in IMS architecture.

At AudioCodes we are increasing our partnerships and continuing to establish effective channels. We believe progress in the 3rd quarter will fuel our growth going forward.