Blood flowing back into Redback

Six months after emerging from Chapter 11 bankruptcy, access equipment vendor Redback Networks turned cash flow positive and EBITDA positive in a highly successful second quarter.

The company reported second-quarter net revenue of $32.3 million, a 7% sequential increase and a 45% increase from the second quarter of 2003. Its GAAP net loss of 20 cents per share beat Wall Street expectations by 6 cents per share.

“It was a landmark quarter for Redback,” said CEO Kevin DeNuccio after more than one analyst on the company’s earnings conference call Wednesday congratulated the vendor on its results.

Redback also achieved its highest level of bookings in two years during the second quarter, attributing its success to the healthy pace of broadband adoption and deployment worldwide.

“Video over DSL is quickly becoming a reality for the world’s leading carriers,” DeNuccio said, adding that although VoDSL hasn’t yet taken off in America, it is growing “full-force on a worldwide basis.”

During the second quarter, Redback announced sales of its SmartEdge service gateway platforms to Korea Telecom, China Netcom's Liaoning Communication Corp. and Thai Telephone & Telecommunication. But the bulk of Redback’s sales, 45% in the second quarter, came from the U.S. SBC is Redback’s biggest customer, the only one to account for more than 10% of the vendor’s revenue in the second quarter. And sales to SBC may have been dampened in the quarter by the carrier’s labor negotiations, DeNuccio said.

Redback expects even higher revenue in the third quarter and is seeking partnerships with large vendors in international markets to help it meet demand. Alcatel and Nokia, which sell Redback’s products, each contributed more than 5% of Redback’s revenue for the quarter, but neither partner was responsible for Redback’s Asian wins during the quarter, for which DeNuccio credited “in-country partners.”

“This is a top focus for us,” DeNuccio said of vendor partnerships. “You need really big players to win the largest deals and get them implemented successfully.”

Redback filed for Chapter 11 protection in November 2003 after failing to achieve sufficient shareholder approval for its own restructuring plan. It emerged from bankruptcy in January 2004, having eliminated $467 million in debt and $44 million in annual expenses.