March 23, 2004 7:01 PM PST

Procket loses star engineer

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Procket Networks, a closely watched Silicon Valley routing start-up, confirmed Tuesday that co-founder and chief engineer Tony Li resigned last week, but company officials are optimistic Procket will survive without him.

"Tony did a great job developing the platforms," said Cary Hayward, director of marketing for Procket. "Without his involvement, along with many other engineers, we wouldn't have products in the market place. But I want to be clear about the fact that the company has now moved on from strictly development to (an approach) focused on sales and marketing."

Procket sells "core routers" that are used by Internet service providers and telephone companies to shunt huge amounts of data at high speeds across the Internet. The company competes against Cisco Systems and Juniper Networks in a market that, according to Infonetics Research, was worth $1.3 billion in 2003 and is expected to grow to $1.7 billion in 2004.

Li, who helped found the company along with Bill Lynch and Sharad Mehrotra, had reportedly tried to quit several times in the past. According to several sources close to the company, Li did not get along with Randall Kruep, the former CEO of Procket, who resigned from his post in June 2003.

Li is viewed as a guru in the routing software industry, having helped create the software used to build Cisco's flagship GSR 12000 platform and Juniper's original core router, the M40. Li also reportedly quit his jobs at both Cisco and Juniper.

While many have viewed Li as the marquee name behind Procket's products, some in the industry see a positive side to his leaving.

"Procket has been suffering from an identity crisis stemming from the tight association with Tony Li," said Andy Price, partner with the executive search company Schweichler Associates. "I think his departure...will help focus attention on the company's products." Price is a preferred shareholder in the company and has helped recruit many of its top executives, including the current CEO, Roland Acra.

Procket has been one of the most closely watched start-ups in Silicon Valley, having raised more than $277 million in funding. It is currently working on another round of funding, which will be used to help build out the company's sales force and marketing efforts, said Hayward.

"Our success will really be judged on our sales traction. Tony helped us build the platforms, and now the challenge for us is to market and sell the products," Hayward said.

Procket has slowly been building sales momentum, but many of its customers have been early adopters like testing laboratories and universities.

Infonetics analyst Kevin Mitchell said it's important for Procket to partner with a larger equipment company to get into major carrier accounts. He said telephone companies and Internet backbone providers are beginning to replace older routing technology with new platforms.

"There's a window of opportunity here for them," said Mitchell. "But if we don't see any revenue ramp this year, that's not a good sign. This is the year that many carriers will be transitioning to next-generation routers."

Procket is still a long way from becoming a serious threat to Cisco and Juniper, which made up 94 percent of the $410 million core router market in the fourth quarter of 2003, according to Infonetics. Procket only garnered 1 percent. Acivi, which recently announced a reseller partnership with Nortel Networks, took 3 percent of the market.

Li isn't the only executive to resign recently. Procket also lost Chief Operating Officer Vito Palermo in January.

 

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