There’s a BOGO Sale on Allot Communications Ltd. (ALLT)

Analysts had expected a first-quarter deployment, but now believe it will happen further down the road, as net neutrality rules for ensuring open and equal access make imposing such policies dicey.

Still, Strategy Analytics identifies the DPI specialist as the leading pure play in the field, ahead of Sandvine and Procera Networks, Inc. (NASDAQ:PKT) , and they estimate the industry will grow into a $2 billion one by 2016. But Allot lost out to Procera on at least one opportunity to provide a large Tier-1 provider in Europe, a key market from which it derives half of its revenues.

Procera differentiates itself by focusing on the enterprise DPI market instead of the service provider end as Allot has done, though it does sell into that market, too. Last month, Procera purchased Vineyard Networks for $28 million to extend its reach into the enterprise DPI market, which it forecasts will grow into a $300 million market all by itself this year. With the growth of cloud computing, “bring your own device” connectivity, and software-defined networking — which some Foolish analysts have deemed “the tech trend for the next decade” — businesses need to monitor their networks just as much as ISPs do. Yet the European win coupled with its dominance in enterprise means Procera is a force to be reckoned with.

Buyout binge coming?
Acquisitions like Vineyards, however, could be the next catalyst for the network data management niche, particularly after Oracle Corporation (NASDAQ:ORCL)‘s $2.1 billion acquisition of Acme Packet, Inc. (NASDAQ:APKT). And Allot Communications just might be grooming itself to be the next one.

In its earnings release, it says it is taking a charge for $15.9 million related to repaying grants it received from the Israeli Office of Chief Scientist. Companies like Allot receiving these R&D loans pay them back over time through royalties,  but in the interim they limit its ability to be sold to foreign companies. Repaying the money early suggests they think there is the possibility someone else might being interested in an acquisition and wants to clear the decks of any obstacles that might prevent it.

The upside is that over-the-top traffic is no longer a niche area of the Internet; it is the Internet market. That provides for significant market expansion opportunities, and that could mean a lot to Allot Communications.

The article There’s a BOGO Sale on Allot Communications originally appeared on Fool.com and is written by Rich Duprey.

Fool contributor Rich Duprey owns shares of Oracle. The Motley Fool recommends Acme Packet, Amazon.com, and Google and owns shares of Amazon.com, Google, and Oracle.

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