Obama pick for FCC chief could be good news for Sandvine

The global economic crisis could wreak havoc on Sandvine Corp.'s books in 2009, but the company's president and CEO is optimistic that a new chair at the Federal Commissions Commission could provide some relief on the net neutrality front. Julius Genachowski, who was tapped to head the FCC, was behind the Obama campaign's innovative use of technology. As the top technology advisor to Obama, he put together a detailed technology and innovation plan that expressed support for open Internet, or net neutrality protections, media-ownership rules that encourage more diversity, and expansion of affordable broadband access across the country, according to the Wall Street Journal. "There is no doubt that Obama and the likely appointee very much understand what's going on in the Internet," says Dave Caputo, Sandvine's president and CEO. "We have already said that we are okay with a net neutrality bill, but it depends what it says. If it says ‘all packets are created equal', then it is bad for the Internet, bad for subscribers, and ultimately bad for Sandvine. Time will tell with this. "There are bandwidth sensitive applications, and latency and jitter applications; we are on an irrevocable path - people understand that a network has to be smarter than a ‘best efforts' network." 2008 was a good year for Sandvine Last week, Sandvine reported a nine per cent jump in revenue, earning $18.6 million in fiscal 2008 despite a loss of $1.8 million in its fiscal fourth quarter. Its biggest gains were in the DSL market, international sales regions and reseller partners, which each contributed higher revenue in the fourth quarter than they did for all of 2007. Sandvine's inroads in the DSL and wireless markets in 2008 helped decrease its reliance on the cable space for revenue. Fourteen new customers were added in the year with eight in DSL, five in wireless, and one in cable. "DSL and wireless were always seen as the two biggest target markets for the company," says Arinder Mahal, an analyst with Dundee Capital Markets. He notes Sandvine picked up some top-notch customers in 2008. "Three of those are tier one DSL customers," Mahal tells Network Letter. "These are defined as having one million or more broadband subscribers. And there are also three wireless customers that are in the top 100 in the world as far as voice subscribers are concerned." Another analyst contacted by Network Letter, who wished to remain anonymous so that he could speak more freely, has some serious concerns about Sandvine in 2009. "They will be losing money throughout the year," he says. "They are still too dependent on Comcast, and though Sandvine was seen as a ‘no go zone' by a lot of carriers, and that should change, there is still competition from Allot Communications, Arbor Networks, Cisco Systems, and Juniper Networks." With greater certainty potentially coming to the net neutrality file in the future, the company is also diversifying its revenue streams to better position itself for future growth. Not only is Sandvine now better exposed to the wireless and DSL markets, the company is getting more revenue from its partner channel. Revenue from this segment now accounts for 46% of revenue, as opposed to 14% in Q4-07. This is due to better traction with strategic partners such as Huawei, Mitsubishi, Alcatel-Lucent, and Motorola. "Success internationally came directly from increased investment in sales and marketing in those markets, including reseller channels," says Caputo. Costs are expected to rise in 2009, the company says. "We will have to increase investment in certain areas," says Scott Hamilton, Sandvine's CFO, adding that R&D investments will continue across all three access areas (cable, DSL, and wireless). Caputo says despite increased operating costs in 2009, he's confident that because the company is in an emerging market and that "Sandvine has a much more diversified business" than it did a year ago, the company is well positioned for 2009 and beyond.

Obama pick for FCC chief could be good news for Sandvine

News | 01/21/2009 1:25 pm EST

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