Redback Rallies Itself
These remarks came during an April 15 companywide meeting, Light Reading has learned. During the two-hour presentation, Redback's top brass encouraged employees to enjoy their work, to “believe in themselves” and the company, despite the frustration of layoffs, constant expense cutting, and a depressed industry over the last year.
CEO Kevin A. DeNuccio told employees that he’s actually hidden some of the company’s successes so as not to tip off Cisco and other competitors.
"We have large-scale deployments going on at SBC, Verizon, and Qwest," DeNuccio said of the company's SMS product line.
DeNuccio also said that one "major carrier" is "using multiple boxes" in several locations to "try and make us a replacement for Cisco." He didn’t elaborate beyond that. He’s only comfortable, he said, announcing "generic progress" publicly.
"Our strategy of not sharing this with the market today is frustrating for some of you," he acknowledged. "Having come from Cisco and having run the sales force there, I do believe the best thing to do is operate as far as possible without them knowing where we're making progress. I do not want to tell Cisco where to go fight us first."
DeNuccio said Redback will only make the big customer announcement he hinted at when the network is in full deployment and when its boxes are handling carrier traffic.
Though DeNuccio seems afraid to tip off Cisco's routing business, elsewhere in the speech to employees he portrayed his former employer as a giant that's been crippled by the telecom downturn. "What's happened in the last three to six months, in my opinion, is that Cisco and Nortel, in the process of fixing themselves, have become much, much weaker competitors to us in the SMS space."
Later, when talking technology, DeNuccio elaborated a bit on the competition. "The reason Redback is able to beat Cisco over and over again, and the reason we have the network base that we have is because IOS [Cisco's software operating system] will not scale."
DeNuccio said Unisphere Networks Inc. has emerged by default as a stronger competitor to Redback on the SMS front. However, citing analysts, DeNuccio said he thinks Unisphere is getting ready to see a "dramatic falloff in [sequential] revenues." This will put the company on its heels and further away from an IPO, he predicts.
Redback's foremost goal now is to reach $60 million in quarterly revenues, execs on the presentation said. When it gets there, the company stands a better chance of impressing Wall Street by attaining a modest profit or by breaking even.
Redback's net revenues were $40.6 million for the three months ended March 31. To meet its year-end revenue projection, its execs told employees on the company call that the firm needs an additional $10 million in edge router revenues and $10 million in SMS revenues (see Redback Announces Q1 Results).
"We cannot cut expenses and fix this company; we have to sell more," DeNuccio said.
On Monday, Redback announced that Belgium’s largest independent service provider, KPN Belgium, is using its SMS boxes in its DSL network (see KPN Belgium Uses Redback).
Redback's executives said the company also needs to continue to chop its cash burn rate and -- adopting a slightly minatory tone -- to quell some internal grumbling. "I don't think we're where we need to be from a teamwork standpoint... There are still people here who don't believe in themselves, they don't believe in the company, and they need to move on," DeNuccio told employees.
During his remarks to employees, CFO Dennis Wolf said Redback's momentum is muted in the market by the din of bad news coming from other systems companies. After pointing out a spate of earnings concerns, revenue shortfalls, and layoffs from several companies, Wolf quipped: "And we met or exceeded earnings revenues and cash guidance, reduced our inventories and liabilities, and our stock dropped 40 percent. What's wrong with this picture?"
Redback says the comments are on the mark. "Redback is getting 100 percent of all domestic incremental business for SMS," says Shailesh Shukla, VP of marketing and business development. "In edge routing, just about any win is going to be against Cisco."
— Phil Harvey, Senior Editor, Light Reading