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PacketFront Bags Another €15M

Swedish broadband access system vendor PacketFront AB will announce Monday that it has closed a €15 million (US$18.4 million) third round that takes its total funding to about €25 million ($30.7 million).

The round was led by a new investor, Amadeus Capital Partners Ltd., but included existing stakeholders European Equity Partners and TLcom Capital Partners Ltd. "For the first time it was a pleasure to go fundraising," says PacketFront CEO Martin Thunman, "and while this might seem like a small amount of capital to our peers, it's a lot of money for PacketFront."

The cash will be used to further develop its products, while expanding its presence in North America and Japan. Last month the firm opened a Tokyo office, and it plans to open one in Boston soon. The company will also exhibit at Supercomm for the first time, where it will announce some new products for operators involved in local loop unbundling (see Swedes, Japanese Team Up).

"So far, we have been reacting to business demand in North America, but now we're going after it," says Thunman (see PacketFront Crosses the Pond). He adds that reacting to demand on an ad hoc basis is a good way to grow and minimize any risks while maintaining "extreme cost control, but it takes a very long time to grow that way."

This new cash round, and particularly its size, was not in Thunman's original game plan. "But in the past 12 to 18 months, we have seen so many projects, and we realized we needed to be more aggressive in our expansion to take advantage of the growing market." That market growth has seen PacketFront win a number of deals already this year, including a new one to be announced Monday at Jordan Telecom (see PacketFront Edges Nortel in Sweden and Dutch Player Uses PacketFront).

Thunman says there are now 25 revenue-generating customers and another five at various stages of deployment, including Jordan Telecom. The company has 52 on staff, but that will rise to 60 during the next quarter.

So what about revenues? Back in October 2002, Thunman predicted revenues of $60 million in 2004 and $100 million in 2005 (see PacketFront: Too Good to be True?). Was he accurate? So far, unfortunately, no. "Our customers did not build out as aggressively as we had expected. But our customers are still investing, and it's a matter of shifting the time period to hit those figures," he says, though he won't say what this year's income will likely be.

"The focus now is to build a bigger pipeline of business, especially in North America and Asia/Pacific. That should help us achieve the $100 million-a-year revenue target within two to four years. We are in negotiations with potential large, medium, and small customers."

The company's main target market is still the local and regional carriers, though, "the ones with deals worth between $1 million and $20 million over three years."

PacketFront's product development will focus on higher-capacity platforms and the further development of the vendor's BECS provisioning system. "We'll continue to innovate with BECS, and provide new functionality," says the CEO. "Carriers want to take some of our features and integrate them with their existing installed hardware platforms, and we're looking at how we can do that. Next year we'll launch a new version of our ASR router that will enable tighter interoperability with other vendors' hardware and enable carriers to extend our service management features across their entire access network."

— Ray Le Maistre, International Editor, Boardwatch

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