Redback sales to BellSouth dip

Sales of Redback Networks’ gear to its biggest customer, BellSouth, dropped in the third quarter, but the vendor expects the situation to return to normal next quarter.

After contributing what some analysts say could be more than 25% of Redback’s revenue in the first half of the year, BellSouth was not among Redback’s top five customers in the third quarter.

“We expected [revenue from] BellSouth would decline, but not this much,” Morgan Keegan analyst Simon Leopold wrote in a research note today.

Redback’s relationship with BellSouth is being watched closely as the carrier merges with AT&T, raising the threat that AT&T might select different vendors. Redback has expressed confidence that BellSouth will grow as a customer post-merger.

Fortunately for Redback, the drop in sales of Redback’s SmartEdge platform to BellSouth was offset by an increase in sales of legacy SMS gear to customers including AT&T and British Telecom.

Sales of Redback’s legacy SMS gear were up 212% from a year earlier (and up 79% sequentially) to $15 million in the third quarter. Sales of SmartEdge gear were up 67% from a year earlier (but down 22% sequentially) to $48 million. Overall, Redback reported nearly $71 million in total revenue, up 95% from a year earlier and 4% sequentially, meeting Wall Street analysts’ expectations.

About 5% of Redback’s sales came through its partner and rival, Alcatel, consistent with previous quarters this year but less than the 12% that came from Alcatel last year.