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Calix: Russo's Not-So-Overnight Success?

Carol Wilson
6/28/2017
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Carl Russo burst on the telecom scene as a founder of Cerent, the first multi-protocol optical networking box, and the guy who sold it to Cisco for $7.5 billion in 1999, instantly earning himself a $342 million payday.

Russo's next telecom venture has arguably been the polar opposite of an overnight success yielding massive riches. Calix Inc. (NYSE: CALX) has certainly not been a failure -- just to have survived in the brutal world of access where, by Russo's own count, 88 companies have failed -- is an accomplishment.

But where Cerent was a great idea whose time came quickly, the thinking behind Calix's current strategy has been ten years in the making, as you can read here in this in-depth look at the company. The core platform to support that strategy began life on a clean sheet of paper in 2011. One of Russo's most recent hires, Executive Vice President of Sales and Marketing Michael Weening, told media and analysts a few weeks back that what Calix is doing now in software-defined access required investment of "hundreds and hundreds of millions of dollars" and can't be easily duplicated by rivals -- except perhaps at the PowerPoint level.

And now after spending all that money, Russo and Calix are expecting it to pay off big time, as they are launching a tsunami of new products and features for their newly flexible approach to access.

How fast are the products coming? Too fast for me, apparently. I needed some time to get my in-depth look at Calix written and in that two-plus week period, Calix announced two major new products, including today's Calix Support Cloud, a new addition to its Calix Cloud service that lets broadband service providers use the analytics and visibility Calix can deliver to do customer support better. (See Calix Boosts Cloud-Based Customer Support.)

As those broadband ISPs have known for some time -- and as Shane Eleniak, vice president of systems and products for Calix, reinforced earlier this month -- the connected consumer is no longer satisfied to know his or her broadband service is working. Consumers expect their service providers to make sure their applications can work, and in today's home that includes the multiple mobile devices the consumers carry and multiple connections to things in the home as well, such as thermostats, game systems, security cameras, etc.

The Calix Support Cloud includes the ability to proactively scan a consumer's home network, looking for problems with gateways or WiFi connections, to enable proactive customer care, and also to better inform customer service reps once those inevitable complaint calls roll in.

You can expect a continued wave of product announcements from Calix -- and yes, they will inevitably claim to be ground-breaking re-inventions, because that's how Calix PR rolls.

What I will be looking for -- along with investors and financial analysts -- is how Calix's customers view all this and if they are ready to adopt at the same pace that Calix is ready to re-invent. If the answer is yes, then Russo has struck gold again, albeit in very different fashion.

In the meantime, head over to the Prime Reading section of Light Reading to read our feature on the company: Calix Gambles on a Software-Defined Reboot.

— Carol Wilson, Editor-at-Large, Light Reading

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CTO48638
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CTO48638,
User Rank: Light Beer
7/5/2017 | 8:57:45 AM
Re: Asterix?
Calix failed in Europe after brutally shutting down its (formelly Ericsson's) BLM1500 OLT.
Shutting down an OLT is not a crime, but leaving BLM customers with lot of empty splitter ports without any replacement ONT for T07XG series - this is a serous offence.
I had to develop own ONT that is compatibile with BLM, E7, ALU, HUA, ZTE, Dasan, Zhone..
Spark initiated by Calix decisions, so I'll not buy anymore anything from Calix..

And - btw, they are really expansive, no way to competit with Huawei and others..
bosco_pcs
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bosco_pcs,
User Rank: Light Sabre
6/29/2017 | 3:53:57 PM
Re: Asterix?
Carol, seven - i learn a lot from your exchanges, so thank you.

But not being a telecom technie, i have a question. Okay, so everyone is doing SaaS these days, what might be Calix's differentiator? Is it the only one doing the cloud now? 

Like SaaS, everyone repeats the same buzzwords like cloud, big data, analytics etc. But it seems CSPs care only about bottomline. I suppose best product at the lowest cost is always good wherever you go.

As an investor, I find it interesting the CALX price/sale < 1 but yet net earning is negative. Perhaps it is because of the R&D. With SaaS though, revenues may actually dropping off even if NG-PON is taking off.

So Mr Russo really has the work cuts out for him. He has to convince his customers to subscribe but he also needs to speak to the financial community convincingly. Remember, the Cerent transaction happened right before the dotcom/telecom bubble bursted and a lot of Cicso's shareholders ended up paying for it dearly 
brooks7
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brooks7,
User Rank: Light Sabre
6/28/2017 | 10:35:31 PM
Re: Asterix?
Carol,

 

I am not accusing you of making this up out of whole cloth.  I know what they are trying to do (and in fact they have been working on SaaS services for about 5 years).

And you are right about having to see how it plays out.  The track record for Calix on that is not good.

seven

 
Carol Wilson
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Carol Wilson,
User Rank: Blogger
6/28/2017 | 5:58:36 PM
Re: Asterix?
That kind of thinking may explain why they are now bringing media and analysts together for the first time to make the case that they are finally ready for AXOS, Calix Cloud and other stuff to take off.  It's hard to debate the pace at which they've been introducing new products this year. 

We'll have to see how it plays out. I can tell you that's why I interviewed three different industry analysts for the story before publishing, this isn't something I'm taking their word on. 
brooks7
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brooks7,
User Rank: Light Sabre
6/28/2017 | 5:47:48 PM
Re: Asterix?
Carol,

I have lots of friends there and they build good products.  But its 15 years already....and the final question in right...where is the next $400M of revenue?  International has failed.  They have not broken into a major new customer base in a LONG time.  We shall see what happens with Verizon, but it is pretty clear that is going to be a lot smaller than FiOS,

And with all of that Calix pours a huge investment into R&D - $33M in Q1....where all the year over year growth was in services.

I think the real question is:  Will Carl Russo be CEO at the end of the year?  The BoD must be wondering when all of this investment is going to actually turn a profit.

seven

 
Carol Wilson
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Carol Wilson,
User Rank: Blogger
6/28/2017 | 5:12:44 PM
Re: Asterix?
I don't think the final chapter is written on that. And the story doesn't say that. If you have an objection to the headline, I understand. 
brooks7
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brooks7,
User Rank: Light Sabre
6/28/2017 | 4:32:11 PM
Re: Asterix?
Sorry Carol...had to start with the title.  I am asking a basic question.  Does a company that has not made back the money thrown into it a success?

seven

 
Carol Wilson
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Carol Wilson,
User Rank: Blogger
6/28/2017 | 3:58:11 PM
Re: Asterix?
Did you read the longer piece? This is just the set-up. The losses are noted. 
brooks7
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brooks7,
User Rank: Light Sabre
6/28/2017 | 3:56:51 PM
Asterix?
Lots of money in pre-IPO + all the IPO money AND they are still losing money.  That might deserve and asterix in the success category.

seven

 
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