Allot Communications said it is acquiring Oversi Networks, which specializes in media caching and content delivery solutions for Internet video and peer-to-peer (P2P) traffic, for $16 million upfront.

Allot could end up paying as much as $5 million more, contingent on performance.

Allot expects the Oversi product portfolio to complement its Allot Service Gateway; the combined product set will enable both video optimization and caching, allowing fixed and mobile service providers to more effectively manage the increasing video traffic on their networks.

Allot’s fixed line customers report that video traffic currently uses more than 50 percent of bandwidth and is rapidly increasing. On the wireless side, according to Allot’s latest Global MobileTrends report, video now represents 42 percent of mobile data traffic worldwide.

Oversi's caching and acceleration solutions are designed to help both fixed and mobile service providers relieve the network congestion associated with Internet video traffic. Its technology identifies popular content and caches it at the edge of the network, with the aim of saving bandwidth and minimizing delays in video delivery to improve subscribers’ quality of experience (QoE) for video.

Rami Hadar, Allot’s president and CEO, said, "Over the past year, we have seen an increase in customer interest in video caching solutions, which made clear to us the critical need for Allot to own a leading solution in this growing market instead of reselling a third-party offering."

Allot also announced Q2 2012 earnings this morning. Total revenues for the second quarter of 2012 reached $26.4 million, a 43 percent increasefrom the $18.5 million of revenues reported for the second quarter of 2011, and it’s a 9 percent increase from the $24.2 million of revenues reported for the first quarter of 2012.