Redback's New Sales Strategy

Redback Networks Inc. (Nasdaq: RBAK) is looking to move a heap of SMS 10000 boxes, which help carriers connect and manage up to 100,000 broadband subscribers.

In fact, the company is so willing to move the gear, they're telling the sales staff that price is not an issue and that they will be awarded special prizes for moving the gear, according to a colorful company memo obtained by Light Reading.

The memo, written by Richard Bibb, Redback's senior vice president of worldwide sales, motivates Redback's sales staff by telling them they'll be entered into a vacation drawing each time they sell an SMS box. And, reading between the lines, it appears to imply that moving inventory, not raising margins, is the ultimate goal.

"Yes that’s right friends, all you have to do to be eligible for one of four fabulous prizes is sell a customer, any customer, between now and January 30, 2002 just one SMS 10000 System of any size, any configuration, at just about any PRICE," writes Bibb, in a memo he recently sent to his sales staff.

"Targeted at the sweet spot of 30-40,000 subs, the bundle lowers the cost of Redback’s leading SMS functionality to below $5.50 per SUB!"

In addition to setting such goals, the Ron Popeil-esque memo provides a less than savory vision of the market for Redback's subscriber management systems, which are used to aggregate traffic for broadband connections like cable and DSL.

"When the SMS 10000 was introduced the concept of a mega-POP [Point of Presence] with over 100,000 [broadband] subs was all the rage," writes Bibb.

"Well, now that the mother of all corrections has occurred -- businesses have to run off real business plans, making bosses are concerned [sic] with archaic concepts like profits and even wear neckties on occasions other than funerals -- it is time to address the mid-range POP size of 30-40,000 subscribers that is rapidly becoming the sweet spot in providers’ architectures.

"We know in this age of budget slashing CFOs, limited capital availability, and modest network builds the entry price of the SMS 10000 has looked like a mountain just too high to climb to many would be customers. Well NO MORE. That mountain has been carved down to speed bump size and you just handed the keys to a HUMVEE to your customer!"

By repositioning its SMS 10000 for midsized POPs, Redback is filling a product gap that had existed between its SMS 1800, which supported 8,000 subscribers, and its old SMS 10000, which supported 100,000 subscribers. The cheeky memo, if nothing else, is good for a chuckle as the company wipes the cream pie from its face, laces up its clown shoes, and begins the long march back to a double-digit stock price.

"They're basically saying, 'Hey, we've got a lemon, we may as well try and make lemonade!' " quipped one analyst familiar with the SMS 10000 sales contest.

Redback, natch, doesn't see the humor (or newsworthiness) of the situation. "This is just a regular sales promotion we've put in place," says Kevin Dickson, vice president of Redback's SMS product marketing.

"The SMS 10000 is a very flexible product that can be aimed at a range of different customers. [Carrier customers] will get a price-per-subscriber, which is very attractive, and they have investment protection as they add subscribers.

"I wouldn't consider this to be a repositioning of the product. This is just a promotion put in place for a particular segment of the market."

- Phil Harvey, Senior Editor, Light Reading
Belzebutt 12/4/2012 | 7:41:18 PM
re: Redback's New Sales Strategy You don't think Cisco or Nortel try to undercut everyone before they wrote off billions worth of inventory?

I don't know about Cisco, but NT reported 25% gross margins while LU reported 12%. You tell me who's undercutting everyone...
B8ZS 12/4/2012 | 7:41:29 PM
re: Redback's New Sales Strategy This is a worthless article. Tell me who right now is not sitting around with warehouses filled with equipment? You don't think Cisco or Nortel try to undercut everyone before they wrote off billions worth of inventory? Since there is no news, lightreading has to have something to write about.

MKTG_Hack 12/4/2012 | 7:41:36 PM
re: Redback's New Sales Strategy Ya gotta remember that Redback now has a former Cisco guy in charge and he's using the classic Cisco tactic of "Tornado Marketing". The whole idea is to gain market share at any cost under the assumption that market share leads to even GREATER market share down the road. The problem is, the tornado died 18 months ago.
opticalwatcher 12/4/2012 | 7:41:43 PM
re: Redback's New Sales Strategy I understand your point of view. Where is the news? Well, IMHO, the news isnt the words in this story. The news is in the actions a company has to take in order to survive. Is that news? Well maybe not in the car market, but it sure is in this space. Bear in mind that about 1-3 yrs ago carries couldnt get their hands on enough of this (in general) type of equipment. This story illustrates the reality of how quickly the winds have changed. Sell sell sell! Well, of course all sales people live and breath by this motto. However, this industry is now at the point where they must bring down the price of their equipment in order for carriers to even consider making any purchases. I mean, who will lose here? Keep the prices high and make no sales, or start slashing a spur interest in your products.
Kevin Mitchell 12/4/2012 | 7:41:45 PM
re: Redback's New Sales Strategy More limited in capabililty. It does have per subscriber firewalls and IPSec VPNs for services. It can handle more subs but less services.
Scott Raynovich 12/4/2012 | 7:41:45 PM
re: Redback's New Sales Strategy russ4br:

News: The VP of sales saying a company will sell product at "any price" has serious implications for profit margins and pricing throughout the industry.
russ4br 12/4/2012 | 7:41:48 PM
re: Redback's New Sales Strategy I see no point in this article, besides Lightreading exposing "internal & confidential" information - without much substance.

Where is the news? "Man bites Dog", yes - "Dog bites Man", no.

I can't imagine any organization - be it GE, Ford, Citigroup, or whatever have you - where the Sales Management message is not "sell, sell, sell".

- russ
lighthearted 12/4/2012 | 7:41:57 PM
re: Redback's New Sales Strategy you clearly haven't been to their offices...there's plenty of office space, but there is no furniture, or people for that matter - just a big fat, unabsorbed expense. I was thinking that they should turn it into a self-storage facility...
Belzebutt 12/4/2012 | 7:41:58 PM
re: Redback's New Sales Strategy ... like Shasta? What is considered a "good" or a "powerful" SMS box in this market (not necessairly the same one)?
scooby 12/4/2012 | 7:41:59 PM
re: Redback's New Sales Strategy ...for a real estate speculator. When do they start selling office furniture in the parking lot?
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