Optical/IP Networks

Redback Showing More Signs of Life

Continuing its slow climb back to profitability, Redback Networks Inc. (Nasdaq: RBAK) today announced another quarter of lowered losses and described bright prospects for the SmartEdge family of routers.

For its first quarter, which ended March 31, Redback reported net losses of $7.1 million, or 13 cents a share, on revenues of $34.3 million, compared with losses of $12 million, or 23 cents a share, on revenues of $32.1 million for the previous quarter (see Redback Losses Shrink in Q1).

For its first quarter last year, Redback reported losses of $33 million, or 64 cents per share, on revenues of $30.2 million.

Redback's non-GAAP losses totaled just 5 cents a share, beating the 9 cents per share analysts expected, according to Reuters Research. Even so, Redback stock fell 23 cents (3.8%) to $5.87 in early after-hours trading.

Redback seems to be continuing the recovery it was flashing last quarter (see Redback Rallies on Q4). The company is sticking to its goal of reaching profitability in 2005, although it might be headed for a speed bump: The book-to-bill ratio, which compares incoming orders to completed ones, was "slightly under 1," for the first quarter, CFO Tom Cronan said on today's conference call with analysts.

Some extra spending is in the works as well. Cronan noted that operating expenses would increase by $1 million to $1.5 million as Redback pumps R&D into "SmartEdge deliverables on contracts we have already won." SmartEdge continues to be Redback's star player, with sales up 16 percent from the previous quarter and up 96 percent from a year ago.

This quarter, Redback picked up SmartEdge revenues from eight of the world's top 20 broadband carriers, four of them representing more than $1 million each, CEO Kevin DeNuccio said on the call.

In particular, DeNuccio believes all carriers -- those top 20 in particular -- are in "decision mode" regarding their next generation of networks and a shift to greater use of Internet Protocol (IP). "We're right in the crux of a major change in how carriers spend money," he said.

Redback considers these new IP-based networks to be fertile ground for SmartEdge wins, one example being the recent contract awarded by BellSouth Corp. (NYSE: BLS). (See How Redback Won BellSouth.)

— Craig Matsumoto, Senior Editor, Light Reading

lightreceding 12/5/2012 | 3:18:02 AM
re: Redback Showing More Signs of Life What would be interesting is to see how much of this improvement is from the debt and lease elimination and how much is from sales increases.

I hope that the financial picture has improved after Redback removed 95% of the equity from the previous shareholders in their debt for equity swap. With the interest service removed on $400,000,000 plus debt and after getting out of the leases on four vacant buildings that were costing millions a quarter you would think they would be showing a profit.
eran_levy 12/5/2012 | 3:17:49 AM
re: Redback Showing More Signs of Life It will be interesting to see how Redback, who used to be the market leader of subscriber management systems for broadband will retain its position. After all, the market is changing and what used to be pure subscriber management becomes a complete edge with more routing and MPLS features. This is the trend and Cisco and Juniper are pushing for, however Redback lacks the complementary product line either from the access side or at the backbone. Will be an interesting competition.
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