The wireless networking industry has had a lively summer, with major deals being inked and competition raging among providers as consumers turn in ever greater numbers to mobile devices for connectivity.

The sector shows no sign of slowing down. Bluesocket, a nine-year-old vendor of wireless local-area networking gear, has sold Pingtel Corp. - the Internet telephony software company it bought just over a year ago - to equipment maker Nortel Networks.

Financial terms of the deal weren't disclosed, but selling Pingtel gives nine-year-old Bluesocket some extra cash in its bid to undercut big-name companies.

Mads Lillelund, chief executive of Burlington, Mass.-based Bluesocket, said shedding Pingtel will enable Bluesocket to compete with name brands like Hewlett-Packard and Cisco Systems, which look poised to dominate the wireless LAN market since acquiring several start-ups.

"This sale is to fuel growth," Lillelund said, "and get deeper into more deals. Our brand is not as well-known, so we don't do as many deals...But we can go head-to-head with these companies. We compete well with them. If we can get to the table with a customer, our win ratio is 65% to 70%."

Bluesocket acquired Pingtel, which had raised about $30 million in venture backing, last summer. Lillelund told VentureWire at the time that Bluesocket needed a solid software play to keep up in a competitive arena. He also said that the company had 80 employees and expected to reach profitability some time in 2008.

But on Wednesday, Lillelund said Bluesocket now has 60 employees and has yet to turn a profit. He declined to discuss the company's financial state in detail. The CEO was tight-lipped about why Bluesocket sold Pingtel so quickly, or if the company was in need of some cash, saying only, "We found an interested, motivated buyer."

Prior to its sale to Bluesocket, Pingtel was backed by Dain Rauscher Wessels, Intel Capital, RBC Capital Partners, SAIC Venture Capital, St. Paul Venture Capital and Wind River, VentureWire records show. Calls to several firms were not immediately returned.

Lillelund said that, at the time of the acquisition, Pingtel's investors took a stake in Bluesocket, which most still retain.

Bluesocket, one of the few remaining independent wireless LAN providers, is fighting for the same customers - hospitals, colleges, hotels and other dense areas - for which established and well-known companies are vying.

Earlier this week, Hewlett-Packard agreed to purchase Colubris Networks, another start-up LAN provider, in a deal with undisclosed terms. Also in recent months, LAN company Trapeze Networks was acquired by cable provider Belden for $133 million.

While Nortel might be closer to jumping into the fray with its newly bought voice over Internet company Pingtel, it may need to figure out one last piece of the puzzle, Forrester Research analyst Chris Silva said.

"Nortel needs a supplier for its LAN gear," Silva said, pointing out that Nortel has traditionally bought such gear from Trapeze Networks, now owned by a competitor.

If Nortel strikes a new agreement with Trapeze - or acquires a different equipment maker - it could become "a big competitor" to Cisco and HP, Silva said.

Silva has been bearish about Bluesocket's prospects, and has grown more so after the recent Cisco and HP acquisitions.

But Lillelund, the CEO, said the market for LAN companies is growing, and that a scrappy independent company like Bluesocket stands a good chance to prosper.

Bluesocket has raised more than $50 million in venture financing, and now has 2,600 customers, Lillelund said.

Investors in the company include Ascent Capital Partners, Boulder Ventures, Intel Capital, Ironside Ventures, Menlo Ventures, Osborne Capital, Ridgewood Capital and Vesbridge Partners. Attempts to reach several firms were not immediately successful.

Source:Dow Jones