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Starent Blazes Q1 Trail

Starent Networks Corp. (Nasdaq: STAR) gave its investors something to cheer about late Thursday with first-quarter revenues and earnings that beat expectations, continuing the growth trend it set last year. (See Starent Reports Q1.)

The mobile packet core specialist also raised its full year earnings projection, a move that helped send its share price up by $2.60, nearly 16.5 percent, to $18.50 in early trading this morning.

Starent reported first-quarter revenues of $73.2 million and net income of $12.8 million, up 30 percent and 32.4 percent, respectively, from a year ago. Net income after non-cash stock-based compensation expenses, or "non-GAAP" net income, was $16.1 million, or $0.22 per share. Financial analysts had been expecting sales of $72.1 million and non-GAAP earnings of $0.16 per share.

In the company's investors' conference call, the vendor's CFO, Paul Milbury, said the first-quarter gross margin was higher than expected at 80.9 percent, due to a greater proportion of software sales for capacity upgrades. While he said that rate would come down as new customers come on board, Starent has raised its full year gross margin guidance to between 76 percent and 76.5 percent, up from the previous guidance of 75 percent.

That margin increase is set to filter through to the bottom line, so Starent has raised its full year non-GAAP earnings guidance to between 71 cents and 74 cents, an increase from its previous guidance of 65 cents to 68 cents. Full year revenues are still set to be around $315 million.

Milbury also noted that Starent had only one customer that contributed more than 10 percent of revenues during the first quarter, with that customer -- not named by the CFO, but known to be Verizon Wireless -- generating 75 percent of sales, or nearly $55 million.

Verizon Wireless cropped up again as analysts posed questions to Starent's executives, though CEO Ash Dahod declined to provide further details of Starent's involvement in the CDMA operator's plans to build a next-generation network using LTE (Long-Term Evolution) radio access and EPC (Evolved Packet Core) equipment. (See MWC 2009: Verizon Picks LTE Vendors and MWC 2009: Starent Dines on LTE.)

The CEO did, though, take a swipe at Starent's EPC rivals. "We continue to see competitors introducing 4G solutions retrofitted from other markets and applications," said Dahod. Whoever could he mean? (See AlcaLu Mines IP Smarts for LTE Core.)

Dahod also said Starent has landed another deal for its recently launched XT30 Service Convergence Platform, which is OEMed from partner Mavenir Systems Inc. (See Starent Intros Convergence Platform.)

With one small deal already under its belt, Starent has now, according to the CEO, landed a deal with an unnamed "Tier 1 UMTS carrier" for its IP Multimedia Subsystem (IMS) platform. (See Cellcom Picks Starent for Femtos and Femtocells Go to Wisconsin.)

Hear more from Dahod about Starent's approach to the LTE market in this LRTV interview:



— Ray Le Maistre, International News Editor, Light Reading

vsomanv 12/5/2012 | 4:06:09 PM
re: Starent Blazes Q1 Trail

that is quite some revenue... so roughly Starent turns out to be a 300 Million Dollar Company (per annual revenue)


Now my questions


(1) Is this sustainable? Starent is a Packet Data Gateway Niche vendor. And with ALU reaping benefits of its EPC Solutions and Starent being displaced from its title as the "Sole Supplier to Verizon for Packet Data Gateways", how long will this go on ....


(2) This niche space was devoid of any stringent competition. The real competitor, 3Com turned CommWorks turned UTStarcom turned Star Solutions seem to be have vanished.


(3) Stoke has received $65M in funding. WiChorus is also on similar lines. And what are they building? ASN Gateways and LTE EPC Solutions. They plan to enter this Wireless Data Gateway business in a big way. They would also be giving a tough competition apart from ALU, NSN, Ericsson/Redback, Juniper, Cisco and the likes.


(4) Starent's IMS is not so heard of. Though they have tried to build on their TAC of the ST platform. They had initial Media Servers and IVR systems possibly on which they would like to build on and get into the domain of IMS delivering systems like P/I/S-CSCF, MRFP/C, AS and the likes... They have keen interest in a partnership with mavenir, for their convergence platform.


Starent's progress is above all these challenges and constraints for the time being. They would continue to rake in revenues, and make it a tougher battleground for the competition...

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