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Publication: Optical Networks Daily
Date: 24th March 2006
Title: PacketFront's global acceleration

PacketFront is beginning to look like the real deal; Swedish companies are traditionally associated with advanced specifications, sturdy engineering and attractive styling, but not always with low cost. The flexibility of the automated PacketFront system appears to offer appeal not only to high-end systems in Scandinavia and other parts of Europe, but also to low-cost projects such as that in Mexico.

Of course we have no idea what the pricing is for the Internet por Fibra contract and it may be that PacketFront was determined to win the project for strategic marketing reasons - either to get a foot in the potentially very large Mexican market, or as a reference customer for other low-end applications.

Still, it is generally true that effective functionality has far higher gearing on the attractiveness of a system than its price, and if a system works really well price becomes less relevant. In any case, if a system misses the point in engineering design terms then it probably cannot be given away. Certainly the comments of the Mexican customer seem very firmly focused on functionality.

The two main issues confronting PacketFront are that it entered the market rather late and that its immediate home market is not very large - at least compared to the countries where its competitors are domiciled. The latter has not been too much of a problem, partly because in the early stages of a company's evolution any country is large enough. Also Sweden has a very strong and diverse broadband sector, making up to some extent in penetration what it lacks in size.

It then becomes a relatively easy progression from a Swedish market of nine million people into the broader Nordic market of 20 million people and from there, again, into the Northern European market of perhaps 50 million or more. Certainly PacketFront's initial strategic statement gave its priorities as Sweden, Europe and then Asia, and it has pretty well pursued that policy taking business in Japan and Malaysia early on. Apart from Scandinavia it has been exceptionally successful in the Netherlands.

In the last few months the company's acceleration in business terms has been quite palpable, starting with the selection by OEN of Houston, which has announced plans to bring broadband to 1.6 million. Though that project remains a little vague in timing terms, in 2006 so far PacketFront has signed two much more specific contracts with Scandinavian utilities (SEAS-NVE in Denmark, mediated by its partner Siemens, and with TROMS KRAFT in Norway) worth around $42 million between the two, and taken a contract in the Netherlands from a major Dutch housing association for a system serving 55,000 homes.

The large but vague OEN contract, the very specific Mexican contract just announced, and a more general contract taken in February from Bay Area CLEC Paxio of Anaheim, California, possibly suggest the company has slightly changed its mind about the NAFTA region and is prepared to be more aggressive there.

An interesting and topical aspect of the present situation is that in October 2005, Riverstone Networks, which after a short bidding war earlier this week between Lucent Technologies and Ericsson fell in to Lucent's hands for $208 million, announced that PacketFront and Riverstone would sell carriers a joint solution based on the interoperability between the Riverstone 15008 Ethernet edge router in the metro edge and core, and PacketFront's fully automated broadband solution, including its ASR aggregation and access routers and BECS system software.

Since both companies lie within Lucent's strategic focus and Lucent is under considerable pressure to strengthen and extend its product range, it may be that Lucent's interest in Riverstone may now extend to PacketFront, particularly given the latter's strong position in Europe, though whether PacketFront is for sale is another matter.

It has never been clear what the Swedish national position is on the sale of the fairly numerous, though mostly small businesses developed as part of Sweden's broadband and other initiatives, though several have been sold. Certainly if it is for sale one imagines Ericsson, just down the road, would have a much better chance this time round than Lucent.