| | Redback is interviewed in Monday's IBD----->
Internet & Technology
Monday, August 28, 2000
Printer-Ready Version
Redback Has One Hot Seller;
Now It Wants To Branch Out
By Mike Angell
Investor's Business Daily
Craig Gentner calls himself a bean counter. And
he’s been counting a lot of beans recently.
Optical communications firm Redback Networks
Inc. saw second-quarter revenue climb 339% to
$48.7 million, 10% above analysts’ estimates.
Those sales came from one product, the
Subscriber Management System, or SMS.
It’s a hot seller because Internet service providers
and regional phone companies are refurbishing
their urban networks. The SMS combines various
types of Internet traffic, whether from dial-up
modems or digital subscriber lines, and puts it all
on the long-distance network.
Redback won’t be a one-product shop for long. It
will soon start shipping SmartEdge, an optical
transport product. It takes data traffic from offices
and homes and sends it across a city’s optical
network.
The firm recently added a third product, which
came from Redback’s $636 million buyout of
privately held Abatis Systems Corp. The Abatis
product allows companies to set up portals for
services such as movies on demand or
videoconferencing.
Gentner spoke with Investor’s Business Daily
recently about Redback’s prospects.
IBD: What does the Abatis acquisition add to
Redback’s product portfolio?
Gentner: The Abatis product allows us to do
value-added services like videoconferencing,
applications, fire walls, security services and
guaranteed levels of service. It does the billing and
setting up of such services for customers. These
network carriers will be able to charge more for
these services.
IBD: Videoconferencing is available now. What will
be the difference?
Gentner: Now if you want to do videoconferencing
you have to go into a room with a video screen
that has a dedicated line. The Abatis product
allows a business user or a consumer to sit at his
desktop computer, call up a portal, find a
conference and click on it. Once you click on the
portal, it will kick up your Internet connection from
128 kilobits per second to 1.5 megabits per
second.
IBD: When will the Abatis start making money?
Gentner: It will be shipping for revenue in the
fourth quarter. We see about $40 million to $50
million in revenue from the Abatis next year. And
it’s a significant opportunity. The market size for
the kind of Internet services that Abatis offers is
$50 billion. All kinds of creative applications are
made possible by these products.
IBD: What sorts of applications?
Gentner: We were talking to a company that
does security for Nordstrom’s. They have a
centralized site for monitoring security cameras
over the Web. They needed DSL high-speed
networks.
We suggested putting these cameras in day-care
centers. Would you be willing to pay $5 to $10 a
month to be able to see your kid while you’re at
work?
IBD: When will SmartEdge earn money?
Gentner: SmartEdge begins shipping this quarter.
It should earn $10 million in the third quarter, $15
million in the fourth. And SmartEdge should bring
in $150 million for 2001. So if you look at those
growth rates, that’s $25 million this year to $150
million next year for SmartEdge and $204 million
this year to $380 million next year for the SMS.
What a fun business to be in.
IBD: Would SmartEdge sales someday eclipse
those of the SMS?
Gentner: They will at some point, probably not
next year. But it’s possible. It would have to do
significantly more business. SMS’ market is about
$2 billion. But SmartEdge’s is about $20 billion.
IBD: How much does Redback equipment cost
compared with the traditional phone equipment
used to do those tasks now?
Gentner: It would cost at least 50% less. Another
way of thinking about it is that the carrier’s
network is way too complex. It can take four to
eight weeks to change a building’s level of Internet
service. With SmartEdge, you can provision
building instantly from a remote location.
IBD: SmartEdge came out of last year’s $4.3
billion buyout of Siara Systems, which was once a
partner with Cerent Corp. (now owned by Cisco
Systems Inc.). How does SmartEdge compare
with Cerent?
Gentner: Cerent only sends the signal. With
SmartEdge, we’ve added error-checking, the
routing and forwarding functions to ensure the right
path across the network. I’m sure Cisco’s working
on something similar, but they haven’t
demonstrated it yet.
IBD: Why did Dennis Barsema step aside as chief
executive last month?
Gentner: Dennis Barsema’s objective was to get
Redback up to $400 million to $500 million in
sales, which we should be at by next year. In
talking to Vivek Ragavan (former CEO of Siara
Systems, now CEO of Redback), he wanted to be
a leader of a multibillion-dollar corporation. |
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