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Technology Stocks : Redback Networks, Inc. (RBAK) -- Ignore unavailable to you. Want to Upgrade?

To: Navigator who wrote (1490)	8/27/2000 11:59:35 AM
From: William F. Wager, Jr.	Respond to of 1956

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.