Redback Cuts, Procket Picks

Redback Networks Inc. (Nasdaq: RBAK) has confirmed that it has made some staff cuts in recent days, though it won't say how many were cut or from what areas of the company. In addition, it looks as if a popular migration trail is being cut across Silicon Valley from Redback to Procket Networks Inc., as more key managers have defected.

Edge routing and DSL equipment specialist Redback is set to announce earnings tomorrow, where it will likely go into more details on the layoffs. Sources close to the company say the cuts affected between 30 and 50 people.

In other employee activity, Stuart Monks, VP of Redback's SMS (Subscriber Management System) engineering group; Kevin Dickson, VP of SMS product management; and Cary Hayward, director of SMS product management, have all left Redback to join Procket.

Monks and Dickson were the founders of Merlin Systems, the startup Redback bought for $57 million in stock back in May 2001. Merlin, founded in March 2000, helped build Redback's SmartEdge 100 product, a smaller version of Redback's Sonet add/drop multiplexer, the SmartEdge 800, that was introduced in January 2001 (see Redback's Got a Mini-Me, Too). In October 2001, Redback announced it had shelved the product as part of a series of R&D projects that were cancelled in order to cut costs.

The Merlin magicians weren't the first Redbackers to hightail it to Procket. Redback's former sales boss Randall Kruep became Procket's CEO in early 2001 (see Kruep Leaves Redback for Procket).

Another Redback expatriate, Pankaj Patel, the former Siara executive who led Redback’s research and development team, has surfaced at archrival Cisco Systems Inc. (Nasdaq: CSCO). Patel left Redback in January.

As if that weren't enough to think about, the company is expected to post more losses when it reports earnings tomorrow.

Analysts expect Redback to report a loss of 13 cents a share on revenues of $28.7 million for the first quarter of 2003, according to Multex.com Inc. During the year-ago quarter, Redback lost 19 cents a share on revenues of $40.6 million.

Meanwhile, Redback's remaining managers continue to stand behind Joel Arnold, one of the four VPs that lead Redback's operations and report to Redback's CEO Kevin Denuccio. Arnold is one of several former Qwest Communications International Inc. (NYSE: Q) executives named in an SEC civil suit alleging that the executives helped inflate the carrier's revenues in 2000 and 2001 (see Redback's Arnold Included in SEC Suit).

Sources close to Redback say Denuccio issued a memo to Redback's employees in late February expressing support for Arnold: "The executive management team and I are fully supportive of Joel, believe in his integrity, and believe that these allegations will not affect his ability to continue executing in his current capacity at Redback."

Though Redback announced a handful of customers during the first quarter, investors were heading for the exits on Tuesday. Redback's stock dropped $0.10 (12%) to $0.74 on Tuesday and hasn't traded above $1 since January 15.

— Phil Harvey, Senior Editor, Light Reading

WiserNow 12/5/2012 | 12:13:29 AM
re: Redback Cuts, Procket Picks So, what is new here? Yesterday's hot IPO falls on hard times, so the talent they attracted goes on to another emerging player -- still looking for the brass ring.

It used to be that talent scattered rather than migrating as a flock. The question is whether Procket is picking the right talent. Given the amount of available talent these days, one wonders if Procket is lazy or if Redback management was really that good?

Also, seems like a LOT of Sr. Management for a company with no revenue.
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