January 5, 2004 12:06 PM PST

Procket lures Cisco exec into CEO spot

Router maker Procket Networks is turning up the heat on Cisco Systems, luring one of Cisco's former executives to come on board as its new CEO.

The start-up, which had been without a permanent CEO since June of last year, announced Monday that Roland Acra, who until recently was senior vice president and chief technology officer for Cisco's service provider division, is Procket's new CEO. The company's founders had been courting Acra for several months before he left Cisco at the end of December.

Analysts characterized the hire as a big win for Procket, which has positioned its high-end routers squarely against devices from Cisco and Juniper Networks. In April, the company introduced what it said were the world's first terabit routers. The gear, which is used by Internet service providers and telephone companies, shunts huge amounts of data at very high speeds across the Internet. Adding a CEO from Cisco should help Procket win credibility with customers.

"I'd say this is a bit of a coup for Procket," said Erik Suppiger, an analyst with Pacific Growth Equities. "It's easy for Procket's competition to take shots at them when there isn't a senior person guiding the company's direction. Bringing in a high-caliber name from Cisco is a strategic addition."

Acra, who had worked for Cisco since 1991, will bring a large Rolodex of carrier contacts with him to his new job. During his tenure at Cisco, Acra had been in charge of the company's flagship carrier routers, the Gigabit Switch Router 12000 and the 12400. In his most recent role at Cisco, Acra worked under Mario Mazzola, senior vice president and chief development officer, formulating the company's strategy in new technologies. In this role, Acra talked to some of Cisco's largest carrier customers regularly, handling any general technology issues they had.

"I've always kept a face toward the service provider market," said Acra. "I think the relationships I've formed with people who buy technology at the high end will definitely be a benefit. I've been working with many of these people for the last dozen years."

"While we are disappointed to see Roland leave," Mazzola said, in a statement provided by Cisco, "we respect his decision to take the next step in his career by assuming the role of CEO at another company. We wish him well in his new endeavors."

Currently, Cisco and Juniper have the core router market locked up. In the third quarter of 2003, Cisco generated about 72 percent of all revenue in this segment of the market, according to Infonetics Research. Juniper accounted for about 20 percent. The next closest competitor, Avici Systems, accounted for only about 3 percent of worldwide revenue.

Procket, which began selling its routers last year, has less than 1 percent of the total market, according to an estimate from Kevin Mitchell, an analyst with Infonetics Research. To date, the company has sold gear in small volumes to universities, research institutions and small service providers. So far, Procket's only major telecommunications customer is the broadband division of Japanese phone giant NTT DoCoMo and its U.S. partner, NTT/Verio.

"I think we are well positioned," Acra said during a telephone interview. "A lot of our success will hinge on cranking up the sales engines."

For the past two years, the core routing market suffered as large Internet service providers and telephone companies slowed spending on new gear. Between 2001 and 2002, revenue in this market plunged roughly 47 percent, according to Infonetics.

But analysts say the tide is about to turn as phone companies and ISPs start upgrading their data networks with higher-capacity gear. Router makers could also benefit from spending by local telephone companies that are expanding their networks into other regions.

Exactly when all this new spending will kick in is hard to say. In 2003, revenue is expected to be $1.3 billion worldwide, relatively flat from a year ago. But with sales accelerating in the second half of 2003, Mitchell predicts that revenue should increase to $1.7 billion in 2004. And by 2006, revenue could grow to $2.4 billion per year.

"There is a window of opportunity for start-ups like Procket," said Mitchell. "It certainly helps to have a high-profile executive from Cisco running the company, but it won't mean a slam dunk for them."

Acra is the second top technical executive to leave Cisco in the past two months. In December, Andreas Bechtolsheim, who led Cisco's high-end enterprise routing unit, left the company.

Cisco said its employee turnover rate of 6.5 percent is well below the industry average. A representative also said that the company expects to lose roughly 10 percent to 15 percent of its senior level staff per year. Cisco has also been attracting new technical talent. In October, the company hired Luca Martini, a former executive from Level 3 Communications.

 

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