Redback Sneaks Out Gloomy Forecast

Firms that put out a press release about financial or legal affairs at the last minute before a public holiday might just as well broadcast an email to the world saying: "Here's some news we hope you don't see."

So it was that Redback Networks Inc. (Nasdaq: RBAK) issued a press release about its projected second-quarter revenues at 18:40 Eastern time (15:40 Pacific) on Thursday, (see Redback Sees Q2 Slide).

The vendor is projecting revenues of just $22 million for its latest three-month period (ended June 30), down from $29.5 million in the first quarter (see Redback Reports $24.9M Loss). According to figures from Thomson First Call, analysts had, on average, been expecting second-quarter revenues of $30.7 million.

Redback, of course, was not available for comment today.

Redback's share price fell by 3 cents on Thursday, to close at 91 cents. Of course, the market had closed before the press release hit the wires, so it could be a stock to watch when the market opens again Monday.

Redback's is capitalized at $166.4 million and has a 52-week high of $2.00, with a low of 24 cents. Its revenues for the whole of 2002 were $125.6 million (see Redback Trims Losses, CFO).

— Ray Le Maistre, International Editor, Boardwatch

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walter_100 12/4/2012 | 11:47:21 PM
re: Redback Sneaks Out Gloomy Forecast verstand,
He took the next year to get upto speed! lol

You are right. I would want to know his side of the story/excuse. He has a great responsibility in the mess...Or maybe since RBAK was public he didn't care...
verstand 12/4/2012 | 11:47:24 PM
re: Redback Sneaks Out Gloomy Forecast .....he was going on a year long sabbatical.


This accounts for one year of VK's whereabout and doing for nothing the $5B merger, how about the second one year?
walter_100 12/4/2012 | 11:47:28 PM
re: Redback Sneaks Out Gloomy Forecast VK was on a sabbatical. He let the world that he was going on a year long sabbatical.
verstand 12/4/2012 | 11:47:33 PM
re: Redback Sneaks Out Gloomy Forecast The deal was probably a legacy of Vinod Khosla who had invested in both companies.

Over two years were wasted in sorting the merger out. Now Redback is just starting to offer SMS features on the SE hardware.

Q: Where was VK during these two years of contention and politicing? lightreceding, can you shed some light on it?
lightreceding 12/4/2012 | 11:47:34 PM
re: Redback Sneaks Out Gloomy Forecast Yes it is a good case study. But as usual what appears obvious is not always the reality of the situation.

Siara is not a separate study. The merger of Siara with Redback caused contention and politicing that lead to a slowdown in development. It was not a lack of roadmap that lead to the downfall, it was fighting over the roadmap by contentious factions.

Siara wanted to build a 'godbox'. Redback wanted to put SMS on the SmartEdge hardware. Redback needs the SMS on the powerful and resilient SmartEdge hardware to compete with Juniper and Cisco. Over two years were wasted in sorting the merger out. Now Redback is just starting to offer SMS features on the SE hardware. They are finally building the product that they need to build. An SMS and Router product that does MPLS. But so are other companies.

While this was happening many original Redbackers where vesting stock worth almost $200 a share after two splits and they were so flush with cash that they probably didn't care what was going on. Most of them left. Management turned over.

Typically high tech business plans are more about the product and the opportunity than running the business. They get the money and roll the dice and see how it works out. It is a whole lot different than a large company like IBM or HP deciding to build another product and having to justify the budget to layers of management.
verstand 12/4/2012 | 11:47:37 PM
re: Redback Sneaks Out Gloomy Forecast B-school case writers, Redback is a good case for you to follow. For certain discussion, this case is ready to wrap. Many VC fund a startup with a good nitch product or technology (has to turn into a sellable product quick). However, there is a lack of follow on products. Product roadmap is usually missing from business plan. After broadband session aggregation, what else can be done? What's the contingency plan when (not an "if")Cisco fights back? One order of magnitude of PVC count (per port) can sustain the lead for how long? It would be great if case writer can get hold of a copy of the original businesss plan submitted to VC. The $5B buyout of Siara can be a separate case to write (by a company valued at $0.17B two year later.) I hope some business school can pick the huge project to collect all those cases happened during this period.
Flower 12/4/2012 | 11:47:46 PM
re: Redback Sneaks Out Gloomy Forecast "All your base" is a catchphrase from a joke that happened over 3 years ago. It has grown old a long time ago. Anyone who still uses it after 2000, is a stupid dork. For some reason Gea still thinks it is funny. It just shows how much out of touch with reality Gea is.

Gea, quit your whining. Even if Bobby spouts out the biggest nonsense, he has a right to do so. Your boring replies only make it more tempting to just skip all your posts. If you don't like Bobby's post, check out the layout of the posts: there is a link you can click to "ignore author" (although it doesn't seem to work for me).

single mode figure 12/4/2012 | 11:47:47 PM
re: Redback Sneaks Out Gloomy Forecast Although I might find Bobby Max to be an omnipresent feature on LR and I might articulate funny pokes at him, they are no redundent fossils of speech, what in the hell does this mean, "all you base belong to us." This must be a riddle and only GEA holds the key. Am I to assume that syntax on your planet is not a requirement?
xos 12/4/2012 | 11:47:53 PM
re: Redback Sneaks Out Gloomy Forecast Redback To File Prepackaged Ch.11 If Debt Deal Isn't OK'd


NEW YORK -- Redback Networks Inc. (RBAK) said Monday it will likely file for Chapter 11 bankruptcy protection with a prepackaged reorganization plan if it is unable to garner adequate approval of a debt-for-equity deal from a group of its noteholders and its common shareholders.

The telecommunications-equipment maker needs holders of at least 98% of the debt and the majority of common shareholders that cast votes to approve a debt for equity exchange. Under the terms of the deal, Redback will exchange $467 million in noteholder debt for 95% of the common equity in the company. Existing shareholders will retain the remaining 5% of equity and have the option to increase their ownership by an additional 10% by purchasing warrants, said Kevin A. DeNuccio, Redback's chief executive, during a conference call with investors.

Redback hopes to win regulatory approval of the deal from the Securities and Exchange Commission this summer. The company hopes to obtain the noteholder and shareholder approval by the end of September, DeNuccio said.

About two-thirds of the noteholders already signed a lockup agreement authorizing the deal and Redback is confident it can obtain sufficient support from the remaining noteholders and common equity holders to authorize the deal and avoid a Chapter 11 filing.

"We feel very confident having gotten two-thirds (of the noteholders) to support this to date," DeNuccio said. "This deal is necessary for (Redback) to remain viable and grow."

Thomas Cronan, Redback's chief financial officer, said the company is prepared to seek Chapter 11 bankruptcy protection with a pre-packed reorganization plan if it fails to obtain adequate support.

"With two-thirds having agreed to the deal, we could go into a prepackaged reorganization and have the deal done that way in court," Cronan said. "We are hoping to do it out of court but we can get it done one way or another. We absolutely know we can get the deal done."

DeNuccio said the $467 million debt-for-equity exchange is the product of months of negotiations. Redback has been trying to pare debt and expenses to better compete in a sluggish spending environment in the telecom equipment sector, the CEO said.

"In discussions with customers, we've heard that our competitors always point out our balance sheet issues," DeNuccio said. "This deal gives us a clean slate on the balance sheet and puts us in a position for a fair fight in the market."

Cronan said Redback had roughly $69 million in cash at the end of the second quarter, $40 million of which is unrestricted.

-By Tom Becker, Dow Jones Newswires; 201-938-2020

single mode figure 12/4/2012 | 11:47:57 PM
re: Redback Sneaks Out Gloomy Forecast The historical analysis by Mister Max belongs in our national archive, strikingly like the founding fathers writing with a hint of Napa-Sonoma Cabernet, certainly a writing for and of our time blended with the ancient sandskrit...

Are you related to Peter Max..
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