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Technology Stocks : Redback Networks, Inc. (RBAK)

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To: William F. Wager, Jr. who started this subject	10/11/2000 6:33:50 PM
From: MarkR37	Read Replies (1) of 1956

Thanks Bruce Brown for these quick notes on the conference call. This was posted on the TMF. "If you have the time, you should visit the Redback.com site and go to the Investors portion of the site to listen to a replay of the conference call. I'm listening as I type this to the live event. So it's random notes. A couple of highlights: 60.2% gross margins (lower due to new products, SmartEdge has lower gross margins than the SMS product line, but will increase in 2001 as they add value added services) The first half of 2001 should see gross margin at 60% increasing in the second half of the year as the value added applications (IP functionality) are coupled with the SmartEdge. SmartEdge gross margins started out at 40-50%, but will increase as the IP functionality is added over the next few quarters. SMS gross margins are 70%. SMS 10000 has gross margins in the 60's. They don't want to get too specific due to competitive reasons, but the SmartEdge margins will increase. They see no pricing pressure all over the world in their SMS wins. Bingo for dominance there! IP functionality in beta by year end and should be added to product in Q2. Net Income should increase to 18% by Q4 (not sure if that was 2000 or 2001, but I think they meant 2001) Quarter ended with $474 cash (down $18 million from previous Q) Increasing demand for products warrant increased inventory to meet demand. Jabil will manufacturer the SMS product line going forward. $645 Million in revenue for next year is the "2001 guidance" 30 customers in trials now for SmartEdge - ramping up in 6 months 50% revenue came from the new products (SMS 10000 and SmartEdge) SmartEdge provided $16 M of the $80 M in revenue. Rapid acceptance from customers. New word heard from an analyst in a question during the CC - score points for him - 'granularity'. I guess it's better than 'color'. Seeing robust demand on all fronts. Positive book to bill. Strong demand across the globe. Quest is a large SmartEdge customer. US West is a SMS 10000 customer. 30 customers in trial or deployment with SmartEdge. Last quarter was 3. Abatis technology will offer complete solutions for customers to offer value added services. Competitive front? Who do you see? They see the same competitors and they continue to win all the larger accounts. Cisco, Nortel and Unisphere (Siemens). Ragavan said taht Redback won every major deal they bid for against these competitors. Abatis products will be about $50 M revenue in 2001. Strong acceptance in Europe and Asia Pacific. They see an increase during next year where the revenues from these geographies will be 40 - 50% of total revenues. Aggressive DSL expansion in Asia and Europe as well growth in fiber penetration in Europe and Asia. SmartEdge growth is growth for the coming year. International growth - Japan, Taiwan, Korea, Singapore. Euro has not been a factor for Redback at all. Great quarter!" BB

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