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Optical/IP

Procket CEO Resigns

Procket Networks Inc. officials confirmed today that CEO Randall Kruep resigned from his post earlier this week, to “pursue other interests.”

The news comes at a time when Procket is struggling to win business, especially with U.S. incumbent carriers. The company has announced a few deals in Japan, and it also supposedly has gotten some business from the federal government (see Procket Gets Unstealthy and Procket Makes a Splash in Japan). But it has not been able to crack any of the regional Bell operators. In an effort to get its foot in the door at these accounts, the company has been scrambling to find a partner.

Procket's said to have been talking to Alcatel SA (NYSE: ALA; Paris: CGEP:PA), Lucent Technologies Inc. (NYSE: LU), Siemens AG (NYSE: SI; Frankfurt: SIE), and, most recently, Nortel Networks Corp. (NYSE/Toronto: NT) (see Procket Talk Turns Up and Will Nortel Pick Procket? ). But so far, nothing's come to pass.

Kruep joined Procket back in February 2001, after leaving his post as vice president of worldwide sales at Redback Networks Inc. (Nasdaq: RBAK) (see Kruep Leaves Redback for Procket). In the two and a half years he has been at Procket, he helped the company close its third round of funding, bringing the total amount raised to $272 million (see Li Named to Procket's Board).

Paul Matteucci, a partner with one of Procket’s investors, U.S. Venture Partners, will be acting as interim CEO, according to the company. Although Matteucci has not been on the board at Procket, he often takes on interim CEO roles, according to the U.S. Venture Partners’ Website. Prior to joining U.S. Venture Partners in 2001, he served as CEO of Hear Me for over five years and took the company public in April of 1998.

As word has leaked out about Kruep’s departure, there has been much speculation as to why he left. Some speculate that political tension between Kruep and Tony Li, one of the company’s founders and its chief scientist, came to a head. Li, who had worked at Juniper Networks Inc. (Nasdaq: JNPR) during its early days and also at Cisco Systems Inc. (Nasdaq: CSCO), has been viewed as an IP routing guru. Word in Silicon Valley is that Li has been unhappy with the direction of the company.

Li has been characterized by some who have worked with him in the past as "difficult." In a previous Light Reading story, it was noted that Li quit his jobs at both Cisco and Juniper -– leaving multiple millions in unvested stock options on the table at each (see New Kid on the Cisco/Juniper Block).

“It’s déjà vu,” says one source, who didn’t want to be named. “It’s the same thing that happened in the early days of Juniper. You’ve got the technology guy butting heads with the sales guy. It’s a classic situation when a company gets to this level.”

Procket would not comment on any alleged tension between the two executives. But Li made this statement:

“I’d like to thank Randall for the contributions and leadership at Procket. I am confident that the company is well positioned for ongoing success.”

Other folks in the industry say that Kruep had made promises to the board during the last funding round that he couldn’t keep. Procket officials deny that the board was unhappy with Kruep’s performance. In fact, a spokesman for the company gave Light Reading this statement from Geoff Yang, a board member of Procket and partner at Redpoint Ventures:

“We have reluctantly accepted Randall’s resignation, and want to thank him for his outstanding dedication and leadership at Procket Networks. Under Randall’s leadership, Procket has developed and delivered breakthrough innovations in IP routing systems, and with its strong customer traction, is ideally positioned for continued success.”

Regardless of the circumstances of Kruep's departure, the abrupt change raises more questions than it answers. The next few months will be crucial for Procket, as it seeks to build on existing customer deals and find a larger OEM partner.

— Marguerite Reardon, Senior Editor, Light Reading

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sailor 12/4/2012 | 11:50:03 PM
re: Procket CEO Resigns ... Fixes anything. CEO survival in the post-bubble economy is proving to be very difficult. First the rumored departure (resignation?) of PK from Force10, and now this.

I'm guessing we will see many more of these events until the economy improves enough for positive cash-flow exit strategies.
echo2 12/4/2012 | 11:50:01 PM
re: Procket CEO Resigns My options are going to make me rich!

echo2
Craig 12/4/2012 | 11:50:00 PM
re: Procket CEO Resigns Force 10 and Procket chiefs gone, done, toast...
ehwhatsupdoc 12/4/2012 | 11:50:00 PM
re: Procket CEO Resigns I'm surprised by this. But I'm also glad the right thing happened here. Still, the root of the management problems at Procket begins with Tony Li. He is behind the hiring of all these problematic executives. Because he doesn't understand managment, he hires people who can't manage either...

Procket's board needs to step up, be more active and aggressive with Tony Li.

Procket's only way to survive now are the following:

1. Partner up with Nortel
2. Develop channels to sell into government accounts
3. Penetrate Japan and Korea's markets

If these items cannot be established in 3 months, Procket is history.
lightreceding 12/4/2012 | 11:49:59 PM
re: Procket CEO Resigns Tony Li might be the management problem at Procket. He has been described as "confrontational" and word is that product focus and delivery have been the issues there.

He apparently left Cisco and Juniper after similar political and product issues.

Randal might be a little "problematic" but he made sales happen at Redback and before. The guy has a track record that most everybody acknowledges including people who worked under him and had to deal with him.

Somebody needs to step up, but since when have boards populated by VC's shown the necessary management action?

Most any start up in the space Procket is in might be done in three months. It has to be very tough being a startup trying to sell to Service Providers these days. What incentive do they have to try and unproven product no matter how good?
Honda_Elise 12/4/2012 | 11:49:59 PM
re: Procket CEO Resigns
Now there's a time-proven strategy for success.
When the CEO leaves replace him with someone
from the VC firm. Makes sense... NOT!
tspoon 12/4/2012 | 11:49:58 PM
re: Procket CEO Resigns product focus and delivery have been the issues there.

Wrong you are. What kruep and Tony did build together is the only system that can totally outperform CSCO and JNPR. Aside from all of the noise around Randall's departure rest assure that you will see proof points of the above soon, thanks to Kruep. In real life and under extreame pressure we all react differently,
and it is not always pretty, but that is life and this is the industry we have chosen to work in. On Monday, we will get up and get on with our lives. Kruep is amazing and Li a genius, that has not changed. Give credit here, just don't criticize and find fault, or go try it yourselrf. It aint easy. Procket really is special. Good luck to all.
4g 12/4/2012 | 11:49:58 PM
re: Procket CEO Resigns Deb Ablahat (sales + marketing) left (or was let go) a few weeks back, though it was not widely reported. Did she know something was in the works?
whyiswhy 12/4/2012 | 11:49:58 PM
re: Procket CEO Resigns Procket, Force 10 , fill in the blank:

Your problem: Nobody ever got fired for buying IBM (Cisco, Nortel, etc).

VC's: Even a "star" CEO can't fix that problem.

Established companies are selling their wares at below cost, whether its systems or components. Market share is the mantra, bottom line is not.

Start-ups would be wise to simply grow the top line slowly, pick off side-deals, and survive with minimal cash outlay. No, I'm not talking hibernate.

CEOs have to manage their boards and their investors expectations, and for start-ups financed with (high risk, high return) venture capital, that's IMHO the toughest job there is (in executive management) today.

VCs and CEOs are just walking away from companies that could survive because they do not have the mindset needed to work hard for a (now clearly much) deferred payback.

-Why
skeptic 12/4/2012 | 11:49:57 PM
re: Procket CEO Resigns I'm surprised by this. But I'm also glad the right thing happened here. Still, the root of the management problems at Procket begins with Tony Li. He is behind the hiring of all these problematic executives. Because he doesn't understand managment, he hires people who can't manage either...
-----------------

I dont think anyone knows enough about what
happened to call any one person the root of
the problem. Only a few people on the inside
know what really happened.

Procket's problem isn't really management, it
was too much money and too high expectations.
Procket's problem is that the all the size
& momentum that they got coming off the bubble
is working against them now.

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