Bay in restart, CFO says

Bay Networks (BAY) expects to post revenues this year that will be largely flat from the previous year, according to chief financial officer David Rynne.

"Bay is at a restart...This year, our revenues will be modestly ahead of last year in an industry that is growing rapidly," Rynne said today at the annual Hambrecht & Quist technology conference in San Francisco.

The networking company posted revenues of $512.9 million in the third quarter ended March 31, down from $521.7 million a year ago and from $514.5 million in the previous quarter.

But despite the revenue performance, Rynne outlined several changes currently in the works to move the networking company forward.

Two issues that have dogged the company since its 1994 formation in a merger by Synoptics of Santa Clara, California, and Wellfleet Communications of Billerica, Massachusetts: a culture clash that slowed its reaction to market changes and two sales channels that were at times in conflict with each other.

These issues, in part, have resulted in lost market share for Bay as its been slow in rolling out new products and experiencing a sagging stock price.

"We're changing the culture," Rynne said. A "listening" program has also been developed to receive feedback from employees, customers, and the financial community, he added.

Rynne noted that what had once been a monolithic development organization has been split into nine divisions, each with its own market and product focus. But within this new structure, the company is also working to develop a "Bay brand" name, where previously parts of its business were known to the financial community by its previous companies' names.

Bay Networks has also integrated its indirect and direct sales forces into one operation that handles sales based on account names rather than geography.

Driving this change and corporate culture evolution is David House, a former Intel executive who was named to the chief executive post last October. He has since brought aboard a new chief financial officer and other key executives.

House cut the company's workforce by 200 to bring employment to 5,748; he also plans to consolidate facilities, Rynne said.

In addressing the last quarter, the CFO noted the company finished the period with higher gross margins and lower operating expenses than anticipated. The company beat Wall Street's expectations by 2 cents in the last quarter for ongoing operations.