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Optical/IP Networks

Is Procket Heading Toward the Edge?

Recent personnel shifts at stealthy router startup Procket Networks Inc. signal that a change in product strategy could be close at hand.

Two days ago, sources say, the company canned roughly 20 staffers, most believed to be engineers, along with up to 30 contract workers. While Procket admits that some employees were let go, it would not give exact numbers. A company spokesperson was also careful not to call the incident a layoff.

“It’s not true; we didn’t have a layoff,” says Suzanne Panopolos, director of marketing for Procket. “We’ve done a workforce realignment. Some people’s skill set didn’t match our plan, and they were managed out. But I wouldn’t call it a layoff. In fact, we are still hiring.”

The realignment and personnel shifts lend credence to the rumor that Procket is shifting its product strategy. Instead of building a core router, the company is now building an edge router, say several venture capital and financial sources.

Panopolos would not comment directly on any product plans. But she did confirm that there have been personnel shifts at the top. These represent the first big shakeup in Procket's All-Star Team. Procket is believed to have raised as much as $70 million from investors including Institutional Venture Partners, U.S. Venture Partners, New Enterprise Associates (NEA), Raza Foundries, and Redpoint Ventures. The founders included well known players Sharad Mehrotra, William Lynch, and Tony Li. Li is known as one of Silicon Valley's top IP software engineers (see Procket Bulks Up). Mehrotra is now working for one of Procket’s investors, New Enterprise Associates (NEA). While Mehrotra is still involved in Procket as the newly named chairman emeritus, he has transferred most of his duties to Randall Kruepp, the president and CEO of the company.

Bob Howard-Anderson, vice president of product operations since August 2000, is also about to leave the company, says Panopolos. Howard-Anderson, formerly vice president of engineering at Sun Microsystems Inc.’s (Nasdaq: SUNW) network systems, was brought into the company to help it focus its engineering, marketing, and operations strategy.

But it seems that Howard-Anderson is one of those who've been “managed out” of a job. Recently, the company hired Mark Showalter, formerly of CoSine Communications Inc. (Nasdaq: COSN), to head up marketing (see Procket Bulks Up). Panopolos says someone has been promoted internally to head up engineering. Howard-Anderson has been reapportioning his duties to others in the company and will soon be moving on, as Panopolos puts it.

If Procket is indeed making the strategy shift: Why? One reason could have to do with the overall state of the core router market, where startups have had difficulty breaking the stranglehold of Cisco Systems Inc. (Nasdaq: CSCO) and Juniper Networks Inc. (Nasdaq: JNPR), which split roughly 98 percent of the market between them.

“All the new players will have a tough time here,” says Hasan Imam, an analyst with Thomas Weisel Partners. “The core is tough to get into. The incumbent equipment players have the big carriers' accounts already.”

But there may be another reason that Procket is shifting its strategy. The rumor currently running through Silicon Valley is that Procket's first round of ASICs (Application Specific Integrated Circuits) -- the high-end customer chips that would run Procket's product -- came back from its foundry and didn't work.

While it’s not unusual for early ASIC designs at startups to have some problems, if the ASICs were complete duds investors may have thought the problem would take too long to fix. Right now it's not clear, but the management changes indicate that something serious is afoot. Industry observers speculate that the company may be shifting its attention to the edge because it would require less complicated ASIC designs.

“I've heard they're targeting the edge and hence don't quite need the ASIC expertise,” says one venture capitalist, who didn’t want to be named. “The edge is about software services, so they need to focus there.”

A more software-heavy focus, along with a move away from the core dominance of Juniper and Cisco, may play better to Procket's strengths.

While Imam wouldn’t comment specifically on Procket, he did say that he sees a big opportunity in the edge router market in general. He says healthy competitive local exchange carriers like Allegiance Telecom Inc. (Nasdaq: ALGX) are still buying gear, and it's an easier market to penetrate than the core.

Industry observers feel that Procket is not out of the game yet.

“Yes, they’ve been wildly overhyped,” says one securities analyst who didn’t want to be named. “But don’t underestimate Tony Li or the rest of their dream team of executives.”

— Marguerite Reardon, Senior Editor, Light Reading
http://www.lightreading.com
COMMENTS Add Comment
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Belzebutt 12/4/2012 | 11:05:29 PM
re: Is Procket Heading Toward the Edge? Juniper always boasts that all its ASICs worked the first time...
doobie 12/4/2012 | 11:05:29 PM
re: Is Procket Heading Toward the Edge? G«£ItG«÷s not true; we didnG«÷t have a layoff,G«• says Suzanne Panopolos, director of marketing for Procket. G«£WeG«÷ve done a workforce realignment. Some peopleG«÷s skill set didnG«÷t match our plan and they were managed out. But I wouldnG«÷t call it a layoff. In fact we are still hiring.G«•

Heehehehehehe: Bullshit BINGO time....!!!!!
hawkman 12/4/2012 | 11:05:29 PM
re: Is Procket Heading Toward the Edge? if they had products, that is.
flanker 12/4/2012 | 11:05:29 PM
re: Is Procket Heading Toward the Edge? G«£ItG«÷s not true; we didnG«÷t have a layoff,G«• says Suzanne Panopolos, director of marketing for Procket. G«£WeG«÷ve done a workforce realignment. Some peopleG«÷s skill set didnG«÷t match our plan and they were managed out. But I wouldnG«÷t call it a layoff. In fact we are still hiring.G«•

Hmmm, I wonder if Procket's customers laugh when marketing talks about their product as well.
joe_average 12/4/2012 | 11:05:28 PM
re: Is Procket Heading Toward the Edge? Come on insiders - what really did go down?

Were the people responsible for the ASICs get whacked?
ipcore 12/4/2012 | 11:05:28 PM
re: Is Procket Heading Toward the Edge? "Hmmm, I wonder if Procket's customers laugh when marketing talks about their product as well."

I assume you are speaking 'tongue-in-cheek' when making this remark, yes? A company must have a product to have customers. This appears to the be second shift in strategy by Procket. They were first going to build ASICs only, then they were going to build a core router, now they are going after the edge. I understand the necessity to change strategy to meet current market conditions, but eventually one has to come out with a viable product. I mean that's the goal of this exercise, isn't it?
eieio 12/4/2012 | 11:05:27 PM
re: Is Procket Heading Toward the Edge? "Hmmm, I wonder if Procket's customers laugh when marketing talks about their product as well."

What customers? They don't have a product. Heck, even their Olive was a belly flop.
The_Holy_Grail 12/4/2012 | 11:05:27 PM
re: Is Procket Heading Toward the Edge? What a terrible spin job. This should be a wakeup call to all employees. If these people were managed out, why were they hired in the first place. Sounds like to me mgt needs to be managed out. No matter how you look at it, it sounds like a layoff. Are they spinning it this way to keep morale high? or so that they can hire maybe in the future?

Surely they make a better public statement than being in denial.
hardcore router 12/4/2012 | 11:05:27 PM
re: Is Procket Heading Toward the Edge? to all juniper employees posting messages here I wanted to say one thing.

the stock options holders (employees) of juniper holds options with the value 244$ - this is where JUNP was 1 year ago. now it is 22$ - you lost 90% market worth.
the options you are holding will NEVER be worth anything.

when you will get fired you will not be able to use them !!!.

whereas I don't need to tell you the value estimation of procket.
and Ill tell you a secret - those who left got ALOT OF MONEY !!!
and those who stay HAVE A LOT OF MONEY.
skeptic 12/4/2012 | 11:05:26 PM
re: Is Procket Heading Toward the Edge? Juniper always boasts that all its ASICs worked the first time...
=================

Except for that packet reordering bug that they
keep trying to explain away.
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