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Optical/IP

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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watchtower 12/4/2012 | 8:26:09 PM
re: Unisphere Posts 47% Revenue Growth god_box,

Siemens may be one of the few places hiring, but we this rumor comes straight from headquarters via reports on Yahoo biz. Siemens is firing, just like everybody else. It's not unusual.

quarter to quarter growth, btw, doesn = smart HR practives. Siemens is as bloated as IBM was in the mid and late 80s.

No difference here.
god_box 12/4/2012 | 8:26:11 PM
re: Unisphere Posts 47% Revenue Growth You guys know your stuff. Growing at nearly 50% q-o-q leads to massive layoffs. I here from my headhunter that U is one of the few places hiring right now. Bet the resumes look great these days.

BTW, much of the silence comes from Unisphere being in a SEC quiet period prior to IPO.
rafaelg 12/4/2012 | 8:26:14 PM
re: Unisphere Posts 47% Revenue Growth Watch, jbug,

That explains the 35% revenew. No payroll...
watchtower 12/4/2012 | 8:26:17 PM
re: Unisphere Posts 47% Revenue Growth jbuggy,

you got no replies. Does that mean there's no one left at Unisphere?

wt
jbuggy53 12/4/2012 | 8:26:43 PM
re: Unisphere Posts 47% Revenue Growth watchtower, you're quick to jump to conclusions. this doesn't say anything about layoffs at Unisphere. At best, there could be in the future. But that's pushing it.

Anyone from Unisphere/Siemens who can tell us what's up?

watchtower 12/4/2012 | 8:26:51 PM
re: Unisphere Posts 47% Revenue Growth it looks like Unisphere is in for some rocky times. Mother Germany will be cutting costs and restructuring at Unisphere.

http://biz.yahoo.com/rf/010510...

Thursday May 10, 12:47 pm Eastern Time

Siemens cuts 2,000 more jobs in profit drive

(UPDATE: Adds union comment, updates share price)

By James Mackenzie

FRANKFURT, May 10 (Reuters) - Siemens AG announced 2,000 more job cuts on Thursday and observers said the axe might have to fall again in the face of continuing gloom in the global telecoms equipment industry.

The German electronics and engineering giant said the latest lay-offs at its ICN fixed-network business came on top of 3,500 job losses announced last month.

That takes the total number of jobs shed at Siemens this year to 8,100, or about two percent of its workforce, including 2,600 already planned at its ICM mobile division.

Siemens shares added 2.7 percent to 84.87 euros by 1523 GMT, slightly ahead of the blue-chip DAX index, which was 1.85 percent higher.

Ernst Konrad, fund manager at Activest in Munich, said the size of the cuts would have little impact on Siemens' workforce of over 400,000, but said more jobs were likely to go.

``It is a drop in the bucket and has very little impact but I think it makes clear that Siemens is at least trying to pursue shareholder value targets and cut some fat,'' he said.

``I think the whole networking industry will have a tough time in the months ahead.''

The latest job cuts add to a grim total in the industry.

Leading companies ranging from Cisco Systems (NasdaqNM:CSCO - news) and Motorola (NYSE:MOT - news) in the United States to Ericsson in Sweden and Philips in the Netherlands have shed tens of thousands of jobs so far this year due to slowing demand and crushing inventory backlogs.


TRADE UNION BRACES FOR MORE LAY-OFFS

Initial union reaction was muted, with officials appearing resigned to further job losses.

``I was expecting it, to be honest, and I think it's quite possible there will be more cuts, that's quite clear,'' Wolfgang Mueller, an official at the IG Metall union in Munich, said.

Siemens said market conditions remained difficult, with the slowdown spreading to previously fast-growing areas such as Internet infrastructure, but it again pledged to stick to medium-term targets for profit growth announced last December.

It said the job cuts and other measures should substantially lift profitability at its telecoms operations, which have been hit by the global slump in networks and mobile handset markets.

The Munich-based group said it was looking for savings of 800 million euros ($709.8 million) from the ICN division, which makes equipment for fixed-line telecoms networks, as well as savings of over 600 million euros at the ICM mobile division, which makes handsets and mobile networks.

It said it would take a restructuring charge of 250 million euros in the networks business and rapidly cut back start-up losses at its U.S. Internet infrastructure operations, including the newly acquired Efficient Networks unit and Unisphere, the Internet router business it has been planning to list.

The measures should allow the units to reach a target of increasing earnings by 300 million euros, it said.

Boosting profitability across Siemens operations has been a central aim for Chief Executive Heinrich von Pierer, who last year set clear medium-term margins goals for all divisions.

The ICN fixed net unit and ICM mobile are aiming at medium term operating margins of 8-11 percent.

Siemens said ICN was expected to achieve operating margins of five to six percent in the next business year to September 2002, in line with the margins last year but well ahead of the 1.6 percent it reached in the second quarter of this year.

It said the unit was expected to generate sales of between 14 and 15 billion euros in the coming business year, up from 11.4 billion in the year to September 2000.

MOBILE WEAKNESS

Siemens said the weakness in the mobile phone sector was expected to continue and was affecting new-generation mobile networks as well as handset sales.

``We expect the difficult market conditions will continue for the moment,'' it said in a statement. ``It is affecting not just mobile telephones but also the expansion of UMTS networks. The market is in a consolidation phase.''

On Wednesday, Volker Jung, head of the Information and Communications division that covers the ICN and ICM units as well as Siemens Business Services, said he expected global handset sales in 2001 of around 400 million, the lower end of the 400-450 million range von Pierer estimated last month.

Siemens made a loss of 143 million euros in its mobile handset operations in the second quarter and saw operating profit in the fixed network segment slide to 50 million euros, less than a third of the previous year's 183 million. Only the mobile networks business held up, with operating profit of about 150 million euros.

(Additional reporting by Marius Bosch)
netskeptic 12/4/2012 | 8:27:48 PM
re: Unisphere Posts 47% Revenue Growth > You're not an insider, but you play one on TV, > right netskeptic?

????

I am not an insider indeed so I do not know anything about business/sales plans/stories etc, however, my work allows me to see a lot of engineering teams out there in action and I would say that Redstone had the strongest one I seen.

> It's a long jump between "these guys have the
> BEST engineering team" to "they suck less than
> all the other CLEC supplying gear makers
> because they've actually made a few bucks" (my
> translation of your thoughts).

Almost correct: I meant "they suck less than ...
because they've actually make a working product and on time."

Also, I would say that this working product does not look even remotely as sexy as vapor being peddled by various VoIP vendors. So, much for having a good engineering team.

> No matter how much Siemens pumps into all the
> vapor they bought for $1 billion, this ERX is
> going to fail for the same reasons Redback's
> SMS isn't paying the bills: it's a DSL focused
> box built for data CLECs. Even the big german
> arm can't change what it was made for.

I suppose that Siemence vapor-buying behavior and the fate of CLECs does not have anything to do with the strength of the engineering team.

> My advice: get Unisphere up on the IPO chopping
> block as soon as possible. Let it grease the
> skids for some more promising companies,
> engineering teams, and technologies.

????

I am not going to participate in Unisphere's IPO in any form or shape, so I will pass on this advice. It is quite possible, though, that if
(1)Unisphere would be able to keep its talent and (2)it will survive the current downturn, they can give these promising companies a good run for their money.

Also, if I keep Redstone engineering in (uncharacteristically) high regard, why it makes you (and some others) so hot ?

Thanks,

Netskeptic

jbuggy53 12/4/2012 | 8:27:49 PM
re: Unisphere Posts 47% Revenue Growth You're not an insider, but you play one on TV, right netskeptic?

It's a long jump between "these guys have the BEST engineering team" to "they suck less than all the other CLEC supplying gear makers because they've actually made a few bucks" (my translation of your thoughts).

No matter how much Siemens pumps into all the vapor they bought for $1 billion, this ERX is going to fail for the same reasons Redback's SMS isn't paying the bills: it's a DSL focused box built for data CLECs. Even the big german arm can't change what it was made for.

My advice: get Unisphere up on the IPO chopping block as soon as possible. Let it grease the skids for some more promising companies, engineering teams, and technologies.



fk 12/4/2012 | 8:27:55 PM
re: Unisphere Posts 47% Revenue Growth It seems to me that RedStone had one of the strongest (if not THE strongest) engineering teams in MA

Methinks the skeptic doth protest too much...
right_leading 12/4/2012 | 8:28:07 PM
re: Unisphere Posts 47% Revenue Growth
I'm with netskeptic. RedStone's progress at the time is still impressive. You have to wonder how much further ahead they'd be without that Gigapacket anchor dragging behind them.
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