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Super stock Redback <RBAK.O> comes to Europe
By Kirstin Ridley
GENEVA, Oct 10 (Reuters) - U.S. stockmarket darling Redback Networks Inc, one of a band of telecoms network upstarts, set up shop in Europe on Sunday and said overseas business would generate 35 percent of group revenues by the end of the year.
Redback, whose stock has touched a high of $143 since its May listing at an adjusted $11.50, told Reuters it was in talks with top European cable TV firms, Internet groups and telecoms carriers about its solution to feeding a voracious appetite for the Internet.
Armed with management that has cut its teeth at the likes of Cisco Systems, the prized Internet equipment firm, Internet auction giant eBay <EBAY.O> and telecoms group Lucent Technologies <LU.N>, Redback says it can ease data traffic jams on the Internet.
Giddy valuations of Internet firms flogging anything from food to financial services may have given investors temporary vertigo. But the market is seeking the next Cisco <CSCO.O> kid on the block, and it has been nurturing Redback.
The loss-making group, in Geneva at the giant Telecom 99 trade fair to network and ply its wares, is opening offices in Britain, Germany and France. It generated second quarter revenues of $11.1 million and clocked up net losses of $2.6 million. Analysts forecast annual revenues of around $50 million for this year.
THE FUTURE IN A BOX
The California-based company makes clever boxes.
Called a subscriber management system, or SMS, they help Internet service providers, cable TV group and phone companies manage thousands of high-speed broadband connections.
SMSs increase the speed and capacity of sophisticated, high speed technologies for fixed line and wireless companies at a time when networks are becoming increasingly clogged up by the heavy flow of Internet traffic.
With Europe's carriers upgrading networks to support high speed Internet access to meet demand from an expected 100 million users logging on across the continent within the next four years, Redback believes now is the time to export.
"Internet use in Europe is expected to grow by 200 percent over the next four years," says Joop van Aard, Redback's vice president of operations, Europe, Middle East and Africa, as the group officially opened European headquarters in the Netherlands.
"This presents significant opportunities for service providers and cable companies -- such as additional revenues derived from large numbers of subscribers -- but also great challenges; namely, managing this large subscriber base and providing it with unique, value-added services."
Redback says its system beat rival boxes from Cisco and Canada's Nortel Networks <NT.TO> to market by more than a year. Unlike Cisco's, Redback also says its box is simple to use as it works with any company's routers and broadband connections.
AWAITING THE FIRST EUROPEAN CONTRACTS
So far, the U.S. start-up has more than 95 customers, including Internet service provider UUnet, which is owned by MCI Worldcom <WCOM.O>, Bell Atlantic <BEL.N>, GTE Corp <GTE.N> and Qwest Communications International Inc <QWST.O>.
Analysts say Europe's former state-owned telecoms giants often have existing relationships with large equipment providers such as Toronto-based Nortel and Lucent, which could make it difficult for the likes of Redback to penetrate that market.
But they are waiting to see if the company -- named after the bottle of beer over which its founders first discussed its future -- can win contracts from leading European cable TV groups such as Dutch-based UPC <UPEC.AS> or NTL Inc <NTLI.O>, which is poised to become Britain's market leader.
"If they went for the Redback solution, that would be a major coup for them," said Scott Moore, London-based analyst with industry research group Information Data Corp (IDC).
01:48 10-10-99
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