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Packet core

Starent Shines in Q4

Mobile packet core vendor Starent Networks Corp. (Nasdaq: STAR) had a stellar final quarter of 2007, beating expectations, setting itself up for further growth in 2008, and sending its share price up nearly 29 percent. (See Starent Reports Q4.)

The vendor, which joined the public market in June 2007, reported fourth quarter revenues of $50.6 million, a near 40 percent leap sequentially and more than double the sales from a year earlier. Analysts had, on average, expected revenues of $43.1 million. (See Starent Leaps on Debut.)

Net income was $4.2 million, or 6 cents per share, compared with a profit of $1.6 million in the third quarter and a loss of $1.2 million a year earlier. The firm’s earnings per share before the impact of stock compensation and other one-time financial measurements was 11 cents, way ahead of the 3 cents expected by analysts.

The news sent Starent’s stock soaring Friday to $15.90. Shares continued to climb Monday, by 10 cents, to $16.00. The company joined the market at $12 in June.

Starent, which has traditionally generated strong business with CDMA mobile operators directly and through a resale agreement with Nortel Networks Ltd. , noted that it had expanded its business with GSM-based 3G operators (UMTS/WCDMA). Starent also said it had started shipments of its boxes, which act as mobile network routers and perform multiple functions including policy management and data service billing support to WiMax customers.

The market for such products is set to grow significantly as mobile operators build up 3G subscriber bases and handle more and more data traffic on their networks.

Starent is well placed to pick up more business, according to Heavy Reading analyst Gabriel Brown, who believes the specialist firm “is currently the only provider with a convincing common platform story for multi-standard access gateways.” (See Flat Is Back: Toward the All-IP Mobile Network.)

In recent months Starent has announced breakthrough deals in Mexico and the U.S. During the past year, it introduced its new ST40 platform (designed for IMS rollouts) and struck deals with UMTS operators in Europe -- Germany, Portugal, Poland, and the U.K. -- and Asia/Pacific (Australia and Taiwan). (See Iusacell Deploys Starent and Starent Intros ST40.)

But not everything has gone Starent’s way. The company, like so many vendors worldwide, is facing increasing competitive pressure from Chinese vendor Huawei Technologies Co. Ltd. , which in December landed an important mobile packet core infrastructure deal at Deutsche Telekom AG (NYSE: DT), beating out Starent in the process. (See Huawei's Core Euro Breakthrough.)

That steal by Huawei resulted in a downgrading of Starent’s stock by analysts at JP.MorganChase , a move that hit Starent’s stock by 22 percent, sending it down to $17.75. (See The Huawei Equation.)

Now Starent is looking to drum up more business and heighten its profile further by exhibiting at next week’s annual mobile jamboree, the Mobile World Congress (MWC, or 3GSM as it’s also known). Light Reading is set to get an update from Starent at that event, so keep an eye on our newswire feed from the Barcelona event at our special MWC 2008 site.

— Ray Le Maistre, International News Editor, Light Reading

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