By Catherine Rampell
Washington Post Staff Writer
Wednesday, December 5, 2007

Gaithersburg's NexTone said yesterday that it was merging with Reef Point Systems of Massachusetts.

The combined telecommunications software and security company will be called NextPoint Networks. As part of the merger, it received $20 million in venture funding led by One Equity Partners, the private-equity arm of J.P. Morgan Chase, which had been an investor in both companies.

NexTone provides software for telecommunications services providers, monitoring the quality of voice-over-Internet-protocol calls and keeping track of billing information for phone service providers. Reef Point Systems focuses on the security of Internet and cellphone calls. The two companies had first decided to partner on a shared product offering about a year ago, NextPoint's chief marketing officer, Mark Pugerude, said.

Pugerude said the company will use the new round of venture funding to support "new talent, new people and new product development." NextPoint's customers include about 550 wholesale carriers and service providers, including Alcatel-Lucent and ZTE.

"The point of this merger was to stay poised for growth," Pugerude said. "This was not a merger for synergy's sake, to eliminate head count. In fact, we're hiring new people."

NexTone has about 210 employees, and Reef Point about 90; NextPoint will probably employ about 325, Pugerude said. The new company will be based in Gaithersburg, but Reef Point's offices in Billerica, Mass., will stay open.

Woody Ritchey, Reef Point's chief executive, will become chief executive of the combined company. David A. Walsh, the chairman and acting chief executive of NexTone, also will be chairman for NextPoint.

NexTone's former chief executive Malik Khan and president and chief operating officer Yousef Javadi left the company last June due to what Khan called "slightly different views on the company's direction."

The merger was finalized Sunday, and the transaction is expected to close in early January, Pugerude said.