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Procket Puffs Tokyo Project

Light Reading
News Analysis
Light Reading
2/20/2004

Procket Networks Inc. says it has bagged another contract, this time with a service provider in Japan.

Procket's PRO/8801 routers will go into the Tokyo-based IP backbone of Media EXchange Inc., a seven-year-old service provider that caters to businesses. Fujitsu Ltd. (OTC: FJTSY; Tokyo: 6702) is contributing high-end switches to the backbone, and integrator Tokyo Electron Ltd. is helping with the project as well (see Japanese Provider Signs Procket).

Media EXchange is calling the project the "highest performance Internet backbone in the world," but details aren't available to back that up. Among Media EXchange's talking points is the combination of IPv6 routing with the quality of service (QOS) needed to support VOIP traffic. It appears the backbone will be based on OC192 links, says Cary Hayward, director of marketing for Procket.

The contract involves the initial phase of Media EXchange's backbone, expected to take about a month, Hayward says. Procket wouldn't reveal any revenue or unit-sales details related to the project.

As with fellow high-end router vendor Avici Systems Inc. (Nasdaq: AVCI; Frankfurt: BVC7), Procket has had to target early adopters, such as universities and Asian businesses. Its announced wins now total seven:

The wins are split about 50/50 between academic and commercial customers, but most of the volume has been on the commercial side, says Hayward.

The list is geographically tilted towards Asia, but Hayward insists Procket is working on deals closer to home. "We have other customer wins in the pipeline, some of them in North America, some in Europe, some in Asia."

Of course, everything isn't sunny for Procket. The company recently lost founder Tony Li and chief operating officer Vito Palermo [ed. note: sheer carelessness!], and it's recently changed CEOs. Reportedly, the company is also completing a $30 million funding round that diluted previous shares' value by as much as 30 percent (see Li Quits Procket, Procket Gets Cisco Exec, and Procket Stuffing Its Pocket.)

Procket also faces potential competition from Juniper Networks Inc. (Nasdaq: JNPR), expected to announce its next-generation router architecture within the next couple of months. Router giant Cisco Systems Inc. (Nasdaq: CSCO) has yet to chime in with such a product, although the company's Heavy Fast Router (HFR) reportedly would fit that bill. For now, Cisco officials say their GSR 12000 core routers suffice even for high-end accounts.

"We have staked a claim [in the high-end market] with the products we have today," says Jared Headley, senior manager of product marketing for Cisco's routing technology group.

Cisco won't acknowledge the HFR's existance, but officials are willing to hint there's life after the 12000. "We've shown [customers] things that help them understand what our next product offerings will be. We're just not ready to talk about it," says Headley.

— Craig Matsumoto, Senior Editor, Light Reading
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coreghost
coreghost
12/5/2012 | 2:24:01 AM
re: Procket Puffs Tokyo Project
After reading your article and the press release,
I'm deeply confused. You are annoucing this
as a customer win, but if you look at the
press release:

"has begun collaborating on the technical integration necessary to build the highest performance Internet backbone in the world in Tokyo."

And

"will be introduced to Media EXchange’s network environment. In addition to commencing test operations, the participants will conduct technical verifications including the operation of the Procket Networks router with edge routers for peering with other Japan carriers."

You are treating an annoucement of a test of
procket equipment like a contract win.
I didn't see anything in the press release that
suggested any commitment in the deal beyond
a test.
H_ngm_N
H_ngm_N
12/5/2012 | 2:24:00 AM
re: Procket Puffs Tokyo Project
Can we get rid of this spammer ?

Or maybe send him a Light Reading tee-shirt with a big red target painted on it and let natural selection take care of him.

= K
gotman
gotman
12/5/2012 | 2:23:43 AM
re: Procket Puffs Tokyo Project
This artical is more about HFR then Procket!!

When are we going to see an aritcal like; "Procket
gets a Rocket" and annouce some real deal with less "confidential stuff"

HFR is a few weeks away i hear, wonder what cisco will do for a bang?... Lightreading care to comment?

gm
green
green
12/5/2012 | 2:23:29 AM
re: Procket Puffs Tokyo Project
talking about customer wins without revenue figures is meaningless.

what is potential revenue opportunity for procket from this 'deal' ?

no matter how good the procket routers are, at the end of the day, procket will be valued only at 4-5 times their yearly revenues.

so wake up fellas and "show me the money "!!!


signmeup
signmeup
12/5/2012 | 2:23:23 AM
re: Procket Puffs Tokyo Project
green wrote:
"no matter how good the procket routers are, at the end of the day, procket will be valued only at 4-5 times their yearly revenues."

Wrong. jnpr p/e=259, csco=38.

If you are referring to the fact that procket is not a public company, the valuation of the company to the VC's is the only number that matters. And since I can reasonably assume that you are not a stakeholder, you cannot possibly know what that valuation is.

mac31416
mac31416
12/5/2012 | 2:23:21 AM
re: Procket Puffs Tokyo Project
"Wrong. jnpr p/e=259, csco=38."

These are price/earning ratios. Enterprise value/revenues are 14.13 for jnpr and 7.57 for cisco

They are quite different things
signmeup
signmeup
12/5/2012 | 2:23:18 AM
re: Procket Puffs Tokyo Project
mac31416 wrote:
"These are price/earning ratios. Enterprise value/revenues are 14.13 for jnpr and 7.57 for cisco

They are quite different things"

Except for the fact that previous question asked nothing for the "Enterprise value/revenues".....

echo2
echo2
12/5/2012 | 2:23:16 AM
re: Procket Puffs Tokyo Project
Normally there are more posts about Procket in non-Procket articles. Has Procket fallen out of interest because Tony bailed?
diag_eng
diag_eng
12/5/2012 | 2:23:15 AM
re: Procket Puffs Tokyo Project
Procket's 15 minutes are over!
green
green
12/5/2012 | 2:23:14 AM
re: Procket Puffs Tokyo Project
as mac314XX correctly pointed out I was stating the revenue multiples and the question was about the revenue opportunity of this particular deal.

how do you figure VC value a atartup ? they look at public company in the same space (csco, jnpr) and look at their public market cap as a multiple of their yearly revenues. This is the only meaningful comparision since startups don't usually show a profit.

company insiders can delude themselves and their sucker employees all they want but the day of reckoning will come when they try to sell out, go IPO or raise more money..

wait there is one more scenario. The super brilliant procket engineers can go back in time with their products and sell their company in year 2000 for an outrageous multiple compared to their revenues..
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