Newport Sinks & Shrinks
In a filing with the London Stock Exchange , Newport said that in the six months to June 30, revenues are expected to be about £750,000 (US$1.38 million), with outstanding orders and deferred revenues just another £360,000 ($660,000). In addition, the company said that "contrary to our expectations," an order with an unidentified Tier 1 carrier, and brokered by an as yet unnamed vendor partner, had not been placed by June 30. (See Newport Touts Channel Deal.)
Newport "has also experienced procurement delays with other large next generation network projects," and if these delays continue, "the Company may not meet market expectations for the 12 months ended 31 December 2006."
The news sent Newport's stock down to 7.5 pence, just over 51 percent, to 6 pence, valuing the company at £10.8 million ($19.8 million). Newport currently has £10 million ($18.3 million) in cash.
The VOIP equipment vendor, which designed a large session border controller called the 1460 to deal with high volumes of IP traffic at carrier interconnect points, floated on London's Alternative Investment Market (AIM) in May 2004 -- before it had even launched a product -- at 71 pence per share. Since then, though, it has found the market much tougher than it, or its investors, anticipated, and earlier this year it had to raise further funds to stay afloat. (See Newport Needs Another $27M.)
Now, with a major purchase order still out of its reach, the company is having to cut costs and is developing a new product while its fate lies in the hands of partners.
"The primary vendor for the Tier 1 deal hasn't completed discussions with the carrier yet," says Newport's VP of marketing Mike Wilkinson. He claims that Newport is still the preferred vendor on the project and that the deal will take time.
Too much time, apparently, for 10 percent of Newport's staff. The company will lay off about 13 employees to cut costs. Newport is aiming for a 20 percent reduction in its cash burn rate by reducing staffing costs, including an additional review of contractors such as its R&D staff in India, and a reduction in discretionary spending, such as marketing. Those cuts will take the company to breakeven in 2007, says the marketing man, though "we have the option to get more cash" if needed.
Wilkinson remains optimistic. "We're anticipating a major pickup in revenues in the second half of this year," he says, claiming that there's even a customer lined up for the vendor's new product, which will hit the streets at the end of this quarter.
That product is a standalone all-IP media proxy server, or -- in terms of an IMS (IP Multimedia Subsystem) architecture -- a Border (or Breakout) Gateway Controller (BGC), says Newport's CTO Alan Nunn. (See Newport Snares 21CN Exec and IMS Guide.)
Nunn, formerly part of the 21CN next-generation network team at BT Group plc (NYSE: BT; London: BTA), says this has been developed with the infrastructure demands of carriers such as BT in mind. He says the new product, codenamed the 310, is a smaller version of the media proxy element contained in the integrated 1460 SBC, and can be distributed around a carrier network and controlled by a centralized 1460 or a softswitch (media gateway controller).
Nunn says the product has been designed to meet specific carrier demand for a distributed IP media gateway. But can't carriers already get such products from the long list of media gateway and router vendors?
Nunn says vendors such as Cisco Systems Inc. (Nasdaq: CSCO) and Juniper Networks Inc. (NYSE: JNPR) are offering such capabilities by adding new blades into their edge routers, but he believes "carriers are keen on separation. They like their routers and border gateways to be separate."
As for the brigade of existing media gateway vendors, which includes all the major voice equipment vendors as well as many specialists, Wilkinson says they're competitive, but at a price. (See Who Makes What: VOIP Infrastructure Equipment.) "Traditional media gateways have media proxy capabilities, but they come with a lot of TDM functionality on board," and that makes them a lot more expensive, he reckons.
Then there are the other SBC vendors, such as Acme Packet Inc. (Nasdaq: APKT), that offer the same functionality. So it's a wait-and-see scenario for Newport, which has touted a major carrier breakthrough for some time now. The company needs a big-name deal -- and very soon -- before its valuation matches its cash reserves.
Wilkinson, though, is still full of fighting talk. "We're still the only large SBC in the market -- Acme's 9000 product is just vaporware," he proclaims, digging at Newport's closest rival. (See Newport Boasts Benchmark and Acme Packet Unveils New SBC.)
Acme's director of solutions marketing, Kevin Mitchell, says his firm's 9000 SBC is "certainly not vaporware. It was on display at this year's Globalcomm event in Chicago and is in trials now."
Mitchell adds that Acme has shipped more than 2,000 units to date and has more than 240 service provider customers.
Acme recently filed for an IPO, and reported a $6.2 million profit from revenues of $18.9 million in the first three months of 2006, suggesting that the market for SBCs smaller than Newport's 1460 is alive and kicking. (See Acme Packet Lines Up IPO.)
— Ray Le Maistre, International News Editor, Light Reading