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RedBack


From Snap shot
RBAK is a provider of advanced networking solutions that enable carriers, cable operators & service providers to rapidly deploy high-speed broadband access to the Internet and corporate networks.


Redback has developed and markets a family of products called , Subscriber Management Systems which are designed to make management of subscribers and easier and scalable. They have the lions share of the market. With the acquisition of Siara they intend to leverage their access to communication companies to deploy optical networks and thereby enter a $20 billion market ( in 2001).



Using figures from this results
http://biz.yahoo.com/bw/000119/ca_redback_1.html

Revenues

For the Year

No breakdown so only the figures.


Net revenues 99.........................64,274
Net revenues 98...........................9,206
-------------------------------------------------
Net revenues change +598%



For The quarter

Net revenues Dec 1999.......26,080
Net revenues Dec 1998.........4,501
--------------------------------------------
Net revenue change + 479%



Sequentially

4th Quarter ......26,080
3rd Quarter......20,590
-----------------------------
Net revenue change + 27 %

If you look at 3Q (+127%)and 4Q( + 54%) in 98 you can see that the 4Q is not there strongest quarter. So only increasing 27% is not that worrying.


Revenues remain strong having sold over 1,300 systems to over 150 customers. While they seem to have cut out 70-80% of the market. The direct sales team continue to be effective.

International:
1) 10% of revenues are international. With the hope that this will become 20% this year
2) Systems being trailed in Europe with 4 of the 5 PTT ( I presume these are the privatised telecom companies). 1 PTT has already agreed to take redback
3) First cable win. Casema, with 1.3 million subscribers .


At the moment they are gaining from the DSL expansion however their SMS solution works equally well with cable or wireless so to some degree they should be future proofed.

The CEO estimates that Redback's market will be in the region of $2 billion a year.

AOL

AOL was an important customer. It sub-contracts the work of looking after subscribers to companies like GTE. AOL insists that the carrier buys Redback. So this got Redback into a lot of carriers.



Customer Base

4 of 5 ROBCs , Qwest , UUNET, ConcentricNetworks, PSI, MindSpring and GTE. , @Work , EarthLink

New Customers this Q

Bell Atlantic , GTE and PsiNet



Balance Sheet

Cash $56 million ( - $8.5 on Q )


Redback Products and new products - scaling up and adding to

Current

SMS500 take approx 4,000 subscribers
SMS 1,000 + 1,800 take 8000 subscribers

SMS Services

However, the new products will be release this year will hold at least 10 times this.
They will:
1 Cost as much as $500,000 (possibly more)
2) To the carrier customers this will decrease the cost per subscriber
3) while allowing to add value to the service. ( see below)
4) Add Border Gateway Protocol ( BGP) routing protocol ( see below)

Add value to Service

An example

The subscriber will be able to change the speed of broadband communication. At a click of a mouse you can ask for increased speed - because you want to download something or watch Video on demand. You get a higher speed and can achieve something quicker or better. The carrier gets to charge you more for using more band width

From the Carrier's point of view once they have deployed Redback they decide what they want to deploy.


Border Gateway Protocol BGP is an improvement over EGP so I will start there.

A user in a company is but 1 subscriber in potentially 1,000's. The entire collection forms a Wide Area Network ( WAN). This is a complex entity with it's own routes and complexities with data passing between one node or another. When a packet of information is headed out of the WAN to another WAN it goes through a device called a gateway. The routing of the packet to the new WAN is decided by the EGP.

Gateways conform to Exterior Gateway Protocol ( EGP ). EGP allows gateways at the boundaries of autonomous systems to exchange information about the routes within their system. This information can be incorporated into making routing decisions between autonomous systems ( WAN is an example of one ).

BGP adds policy based routing to EGP. BGP can route packets according to political, security or economic considerations.

A major objective of BGP is to cut down the amount of non-local traffic in autonomous systems.

So if you are a packet travelling from Network 1 to Network 3 you would be routed by C avoiding A and B and thereby lowering traffic going via 2.



....................................................... Network 1
....................................................... 0-----/0
...................................-.-------BGP- |.\.../...|
......................A.........../................|.. |.../\.....|
.............................../.....................|.. 0/----\.0
............................/........................|...
........................./...........................|...
Network 2...../..........................C..|....................
0-----/0......./.................................|...............
|.\.../...|BGP..................................|..........
|.../\....|........|..................................|.............
0/----\.0......|.................................|...............
...................|...B...........................|...
...................|...............................|...
Network 3..|...............................|.....................
0-----/0.......|...............................|..............
|.\.../...|BBGP----------------------|.............
|.../\.....|.......................................................
0/----\.0.......................................................


The SMS system has become an edge router.


Siara

Siara will offer optical solutions for the metro-network which should be a $20 billion market in 2003.

Siara strengths

1) ASIC's - the ASIC team were originally from NextGen and previous to that they worked on AMD's K6 chip.
2) Sonet - Team from Nortel - the leaders in SONET
3) IP - protocol - they have a team with experience with experience with BGP

To handle the large traffic that will be produced by broadband requires 5 or 6 big boxes in the central office. Siara has put this functionality into an ASIC and put this in 1 box.
Advantages
1) Cost benefits - but no competetive advantage for being cheap
2) Scale up ( More important )
3) Space benefits - boxes are enormous - Siara's solution takes 1/10 power , 1/10 space , 1/20 cost.

Siara

Allows you to scale quickly and to add new services.


Why did they not IPO

1) Resources
2) Access to all but one of the Regional bells. They can get feedback and testing on systems they just wouldn't be able to get otherwise.
3) Access to 120 sales and support people
4) Siara CEO Vivek ragavan "Together we'll build an independent company that can take on the established players.

The affect of all this was in Siara's opinion to reduce the time to market / sales by 6 to 12 month.


Synergy

Taking the example of DSL's.
Readback produces a box which hangs off the end of the Digital subscriber Line Access Multiplexer. Providing an interface with the DSLAM traffic.
Deals with manageing user authenticaltion etc.
Siara optical technology is aimed at taking the information from the back of this box and into the Metro-network or LAN



Redback Competitive advantages - Notes taken from interview with Craig Gentler (CEO)

Development of software to go with SMS is a very complicated process - 2 years to develop.
Software has to be customised to the carrier's / ISP's requirements so that once deployed at a site you can't deploy other manufactures SMS products.

As the CEO said once were in we have locked them in.

By the way "Subscriber Management System" is a trademark of Redback Networks. They didn't need to may as well just call them Redbacks.

Competition

In the SMS market know one can offer a comparable solution. They saw an opportunity and built a solution which leaves the competition ( i.e. CISCO in their starting blocks ).

Siara does have competition in the metro space. Some still private firms like Optical networks inc. We will see...........



Siara and more

http://www.redherring.com/insider/1999/0825/inv-redback.html
http://www.redherring.com/insider/1999/0901/news-siara.html
http://www.redherring.com/insider/1999/1130/news-siara.html


From ADavin
http://www.tsrec.com/broadbandbox.html


From TheNewb
http://www.pathfinder.com/fortune/2000/01/24/net3.html

From MacroTrend
http://www.individualinvestor.com/tbd/anfdt_frm.asp?ff_id=4275


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