Procket Talk Turns Up
With big names like routing guru Tony Li involved in the company and former Redback Networks Inc. (Nasdaq: RBAK) CEO Randall Kruep at the helm, the stealthy startup has long been pegged as a company to watch. But things at the company have recently gone quiet -- almost too quiet. That is, until this week.
This morning, Pacific Growth Equities Inc. published a research note stating that Lucent Technologies Inc. (NYSE: LU) was considering the startup as a partner to supply it with wireline IP routing gear. Lucent, which has been leaning heavily toward a partnership strategy for IP routing products, has been rumored to be close to finalizing a deal with Juniper Networks Inc. (Nasdaq: JNPR) (see Is a Lucent/Juniper Deal in the Works?). Erik Suppiger, the Pacific Growth analyst who wrote the note, says that Lucent has not yet made a final decision about a partner.
“My call today was not suggesting that Juniper or Procket are going to win,” he says. “But what we’ve heard from is that Lucent is seriously considering Procket.”
Neither Lucent nor Procket would comment on the talks.
If Lucent were to choose Procket, the implications would be huge. For Procket it would mean entering the market with an already established sales channel and a first-class ticket into the largest incumbent carriers in the country. It would also give the startup instant credibility that would likely carry over into its other sales efforts.
For Juniper the deal would be a blow. It could hurt Juniper's perception as a cutting-edge provider of routers to regional Bell operating accounts, because that is the market on which it has focused. Archrival Cisco Systems Inc. (Nasdaq: CSCO), in contrast, has a lock on the enterprise market and already has a deal in place with Lucent for that market.
Juniper has not gained market share against Cisco in the core router market since the first quarter of 2001, says Kevin Mitchell, an analyst with Infonetics Research Inc.. At that time, it had about 32 percent of the market. In the third quarter of 2002, it came in with only 16 percent market share. Not only has Cisco taken back some of the market share it had lost to Juniper through late 1999 and 2000, but Juniper has also lost some share to emerging players like Avici Systems Inc. (Nasdaq: AVCI; Frankfurt: BVC7) and Alcatel SA (NYSE: ALA; Paris: CGEP:PA), says Mitchell. Procket’s entrance as a Lucent partner would inject yet another legitimate competitor into the mix.
“We believe that if a startup vendor can demonstrate such advantages over Juniper, it is particularly threatening because Juniper’s market strategy relies heavily on being the technology leader,” writes Suppiger in an investment note published this morning.
But all of this speculation does seem a bit premature. Despite the rumors, some say it’s unlikely that Lucent would partner with a startup over an established company like Juniper. Rick Thompson, a principal analyst with PointEast Research LLC, says that Lucent might be using talks with Procket as leverage to negotiate a better deal with Juniper, which already has two successful reseller arrangements with LM Ericsson (Nasdaq: ERICY) and Siemens AG (NYSE: SI; Frankfurt: SIE).
“Unless Lucent knows something about Procket that the rest of the world doesn’t, it seems more realistic that Lucent is just trying to sweeten the deal with Juniper,” says Thompson. “Nobody is really sticking their neck out to purchase new technology, so I would expect Lucent to take a more conservative approach.”
Deal or no deal, Procket may indeed be ready with product. Last week, a Japanese news service reported that NTTPC Communications Inc., one of the Procket’s Japanese distributors, was displaying a Procket router at the Net&Com tradeshow in Tokyo. The PRO/8801 is described in the article as a backbone router that supports 80-Gbit/s capacity. The initial products, which will be shipped starting in March, will support OC192, 10-Gigabit Ethernet, OC48, and Gigabit Ethernet interfaces. The router is five rack units high, or about 22cm in height.
A Procket spokesperson refused to comment on the Japanese story and would not confirm any of the product information, saying that the company is still in stealth mode.
The reported dimensions, interface support, and capacity of the PRO/8801 puts it squarely in line with midrange core routers like the GSR 12000 series from Cisco, the M-Series from Juniper, and the SSR and QSR from Avici.
— Marguerite Reardon, Senior Editor, Light Reading