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Unisphere Posts 47% Revenue Growth

Unisphere Networks Inc. (Nasdaq: UNSP), the American spinoff of Siemens AG (NYSE: SI; Frankfurt: SIE), is trying to drum up renewed interest in its IPO by touting revenue growth at a time when some equipment providers are actually shrinking.

The company, which filed for its initial public offering with the Securities and Exchange Commission back in September is about to update its S-1 filing by plugging in pumped-up quarterly revenue numbers (see Unisphere Tunes Up for IPO), according to officials at the company. Unisphere will report $44.1 million in revenue for its second quarter of 2001, which ended in March. This compares to $30.1 million in the previous quarter, sequential growth of 47 percent. Officials would not say how much they lost in the quarter, but the numbers were expected to be filed with the SEC shortly.

Although the company would not comment specifically on the breakout of those numbers, analysts say the majority of its growth likely comes from its edge routing/broadband aggregation products, the ERX 700 and ERX 1400.

“The ERX is selling like hotcakes,” says Michael Howard, principal analyst and co-founder of Infonetics Research Inc.. “I’ve even heard competitors saying that they’ve seen them in more and more accounts. They seem to have gotten the formula right for the ERX: It’s got broadband aggregation, full routing, and it’s a fast, compact, well-priced product.” Over the past several quarters Unisphere has steadily been improving its market share against market leaders Cisco Systems Inc. (Nasdaq: CSCO) and Redback Networks Inc. (Nasdaq: RBAK). During 2000, carriers spent about $610 million on edge aggregation equipment, according to Infonetics. In the fourth calendar quarter, Cisco and Redback were almost evenly split in terms of market share, with 42 percent and 37 percent respectively. Unisphere, which had no market share just five quarters earlier, ranked third last quarter with 8 percent, say analysts at Infonetics.

The ERX also competes in edge routing against Cisco, Juniper Networks Inc. (Nasdaq: JNPR), and Riverstone Networks (Nasdaq: RSTN), and it has improved its share of that market as well. Working through Siemens' sales channel, Unisphere has won most of this business overseas, says Kevin Mitchell, directing analyst of service provider networks for Infonetics. Because Siemens will still own a large portion of Unisphere after the public offering, that relationship is expected to continue (see Unisphere Registers For IPO).

How well has it done overseas? According to Infonetics, the company generated about 75 percent of its business outside of North America, with about 60 percent of its total business being done in Asia Pacific last quarter. Most of its customers are top-tier carriers like Hanora Telecom (Korea’s largest broadband provider), Telekom Malaysia, and Deutsche Telekom AG (NYSE: DT). Most recently it announced a contract with Beijing Telecom to deploy ERX equipment in 14 provinces in China.

Its international base puts Unisphere in a good position for two reasons, says Mitchell. For one, carrier capital spending cutbacks, which have recently hurt Redback and Cisco in the U.S., haven’t affected Europe and Asia as much. Secondly, most of the growth in the broadband aggregation market, which is expected to grow to about $2.1 billion by 2004, will come from sales outside of North America.

Unisphere has also targeted two other smaller, but growing markets with its SMS 2100 voice mediation switch, which converts voice circuit traffic into IP traffic, and its SRX 3000 softswitch platform. In the voice gateway market -- which, according to Infonetics is expected to grow to $2.7 billion by 2004 from $88 million last year -- Unisphere was second in market share at 18 percent last quarter.

The SRX softswitch isn’t yet shipping, but the market potential is big -- about $1.7 billion by 2004 up from about $35 million in 2000, according to Infonetics. But Unisphere will also have to contend with competition from a slew of other companies, including, again, Cisco, Convergent Networks Inc., Lucent Technologies Inc. (NYSE: LU), Sonus Networks Inc. (Nasdaq: SONS), Telica Inc., Oresis, Santera Systems Inc., Rapid5 Networks, and Taqua Systems. Unisphere officials say the company is waiting for market conditions to improve before going public. The last networking company to take the plunge into the icy IPO waters was Riverstone (see Riverstone IPO Toughs It Out). Its price started at $13 a share and fell as low as $6.62. Today, it was trading at $17.09.

“In January, people were saying they thought things would turn around by March and that the IPO market would pick up by September,” says Gina Sockolow, an analyst with Buckingham Research Associates (BRA). “But it’s now May and things still haven’t turned around. Clearly, Unisphere is getting ready for the public market.”

-- Marguerite Reardon, senior editor, Light Reading http://www.lightreading.com

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flanker 12/4/2012 | 8:28:39 PM
re: Unisphere Posts 47% Revenue Growth
bloody jerries think they can make a router...
Scott Raynovich 12/4/2012 | 8:28:38 PM
re: Unisphere Posts 47% Revenue Growth neither. It be the Redstone machine.
right_leading 12/4/2012 | 8:28:38 PM
re: Unisphere Posts 47% Revenue Growth
Is the the Argon or the Castle machine?

kupfi 12/4/2012 | 8:28:33 PM
re: Unisphere Posts 47% Revenue Growth Forgot routers, they cannot write software, period.

I hate to generalise but they are only good at Hardware (i.e. building BMWs, machinery etc.)

Just as an example, I worked for several years in one of the biggest software/hardware developer in Germany (is part of the company that we are talking about) Can you believe that I never did (and never was asked to do) even one hour of overtime. Whenever we missed a deadline, we got an extension.

Imagine where an American company will land if people adopt this attitude.
chubbabubba 12/4/2012 | 8:28:32 PM
re: Unisphere Posts 47% Revenue Growth Last time I checked, Unisphere's products were made in the good old USA by a combination of US Citizens and Indian and Asian foreign nationals. I haven't heard any goosestepping in the hallways. My friends haven't developed German accents...
netskeptic 12/4/2012 | 8:28:32 PM
re: Unisphere Posts 47% Revenue Growth
You are right about foreign (and foreign managed) high-tech companies (I happen to work for a few of them too), local management (with all its problems) has a huge competitive advantage.

However, Unisphere is truly a local company, just look at their management team, for example.

It seems to me that RedStone had one of the strongest (if not THE strongest) engineering teams in MA and it is the basis for the whole Unisphere now. Look, these guys were saddled by Siemens with vapor from both Castle and Argon and they are still managed to look pretty good.

I suppose that once economy will improve they will be able to do much better than that.


Thanks,

Netskeptic

JackStrat 12/4/2012 | 8:28:31 PM
re: Unisphere Posts 47% Revenue Growth Ok your not idiots, your just ignorant.

Unisphere gear is Gǣborn in the USAGǣ just like the Springsteen song. Not that it matters; quality is quality no matter where you find it. In this case itGs found in the USA.
-Jack
watchtower 12/4/2012 | 8:28:29 PM
re: Unisphere Posts 47% Revenue Growth If their team was so hot, why'd they have to sell out to Siemens in '99 when Redback was running wild with a competing product?
netskeptic 12/4/2012 | 8:28:26 PM
re: Unisphere Posts 47% Revenue Growth > If their team was so hot, why'd they have to
> sell out to Siemens in '99 when Redback was
> running wild with a competing product?

(1)I suppose they were looking into making a quick buck on what they have right there instead of going all the way public. As far as I remember they were only like 18 months old at the time and
in early 1999 $500m was still considered a very good money :). In any case it does not have anything to do with engineering.

(2)They have an excellent engineering team wrt to other NE companies, and Redback is from CA, so it is quite possible that overall level is higher in CA.

(3)I would not say that Readback is doing so well now.

Thanks,

Netskeptic



watchtower 12/4/2012 | 8:28:23 PM
re: Unisphere Posts 47% Revenue Growth Missing key development dates has nothing to do with engineering?
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