Procera Networks, Inc. (PKT-AMEX)

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December 12, 2008 Issue

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Procera Networks Is Revolutionizing The Networking Industry In Creating A New Evolved Inspection Technology That Will Give Broadband Service Providers A New Level Of Control, Awareness And Protection For The Networks

BIO:
James F. Brear, President and CEO
James F. Brear, an industry veteran with more than 18 years of experience in
the networking industry, leads Procera Networks to further the company¹s
position as the leader in managing and monetizing the world¹s most complex networks. Most recently, Mr. Brear served as vice president of worldwide sales and support for Bivio Networks, a maker of deep packet inspection platform technology. Under his leadership, the company rapidly expanded its worldwide sales presence, resulting in sales to a number of global Tier 1 service providers, government agencies, and Global OEMs. Prior to Bivio, Brear was vice president of worldwide sales for Tasman Networks (acquired by Nortel), a maker of converged WAN solutions for enterprise branch offices and service providers. Earlier in his career, Mr. Brear was the vice president of worldwide sales for Force10 Networks, where he was responsible for taking the company from a pre-revenue start-up to the industry leader in switch routers for high performance Gigabit and 10 Gigabit Ethernet. In addition, he spent five years with Cisco Systems where he held senior management positions in Europe and North America with responsibility for delivering more than $750M in annual revenues selling into the world¹s largest service providers. Previously, Brear held a variety of sales management positions at both IBM and Sprint Communications. He holds a Bachelor of Arts degree from the University of California at Berkeley.

Technology
Business Software & Services
(PKT-AMEX)

Procera Networks, Inc.
100 Cooper Court
Los Gatos, CA 95032
Phone: 408-354-7200

Interview conducted by: Walter Banks, Publisher, CEOCFOinterviews.com, Published – December 12, 2008

CEOCFO: Mr. Brear, you are in a very exciting industry that is very necessary today, dealing with cable companies, please giving us your vision for Procera Networks?

Mr. Brear: “Procera Networks’ mission, is to revolutionize the networking industry in creating a new evolved depack and inspection technology that will give Broadband service providers a new level of control, awareness and protection for their networks which will then allow them to monetize their investments.”

CEOCFO: What exactly do you provide; is it hardware, software or both?

Mr. Brear: “We are actually a platform. We provide a technology that includes hardware and software in one unit.”

CEOCFO: Can you tell us a bit about what the specific values come from that?

Mr. Brear: “If you go back to why Procera is exciting it is actually that the market is really exciting. It is where the Internet is going and over the last several years the Internet has changed demonstrably. If you look at the users, the behavior of the Internet and the applications that are available to us, things have dramatically changed. A good example would be, YouTube represents 11% of the Internet. You have these peer-to-peer protocols such as Bit Torrent, eDonkey and Iphones; all of these applications that literally did not exist two years ago. Not only have we seen the traditional matrix of the Internet growing with the amount of users and the time that people are spending on the Net, but you have seen a complete change in behavior of the users. That’s putting a profound impact in the service providers’ ability to maintain and provide a quality service that you would expect.”

CEOCFO: What is your revenue platform; is it a one time sale, or does it have a razorblade component?

Mr. Brear: “We start with an initial sale of hardware and software. Then there’s an ongoing annuity for support. In addition to that, typically people will buy additional blades or cards that will go into the chassis as they expand their networks. We are very focused on all service providers, but mainly right now the big opportunity for us is cable and mobile or wireless networks. This would be fixed wireless or mobile as in, the mobile phone industry, as well.”

CEOCFO: Where is your competition coming from and why are you better?

Mr. Brear: “We have about four direct competitors. Those are Sandvines, Cisco Systems, Arbor Networks and Bluecoat, through the acquisition of Packeteer. All are very good companies but traditionally, were what I call the first generation DPI vendors. None of them have really evolved to deliver what service providers require today. That’s really a services creation platform. In order to deliver on that, you have to be able to provide a very accurate technology that can identify and classify traffic very accurately. So that you can then in turn, create a service.

What we do, is give the service provider a new level of intelligence and confidence to be able to deliver a service. If that service is a game service, a video or voice service, in order to deliver those services, they must have a level of accuracy on understanding what is running over their network. That’s a fundamental requirement which we do very uniquely. There are several other things that we do. One is performance and scalability. We are four times the competition in terms performance and scalability. Additionally, we can implement and insert the technology anywhere in the network, from core to the edge, which is quite valuable to these carriers.”

CEOCFO: Do you still invest heavily in R&D?

Mr. Brear: “We significantly invest in R&D. Predominantly; we invest in our software suite, which is really the differentiator for us.”

CEOCFO: Where do you see you growth coming from; is it through acquisitions or what?

Mr. Brear: “Not today. Our growth is again focused just on purely sales and it’s predominately the cable and mobile wireless markets. That’s where we are seeing our main growth.”

CEOCFO: In order to facilitate future growth will you have to expand your sales force or you are satisfied with what you have currently?

Mr. Brear: “No! We are in the height of growth age right now, but in fact we have no need to hire additional sales personnel. We are actually aggressively wrapping up our support organizations in the field as well as in our customer support organization and in our development organization. That’s where we are requiring growth to deal with the demand that we are seeing.”

CEOCFO: What areas are you in on a global scale as well as North America and where do you project yourself in the future?

Mr. Brear: “We actually market and sell in all of the Americas including North and South America. We have customers in the Middle East, Asia, and in Europe. We continue to market to all those regions.”

CEOCFO: What’s the financial picture like today and will you need to raise additional capital?

Mr. Brear: “We plan to raise additional capital to fuel this growth and that should be something that will be on the news over the next several weeks.”
 

CEOCFO: Do you manufacture your own products or do you outsource?

Mr. Brear: “We do not manufacture our own hardware. It is done for through a contract manufacturer, which helps with our costs and it helps to scale and gives us speed.”

CEOCFO: In closing, potential investors looking at Procera Networks, what would you like to say to them in closing and why should they consider your stock?

Mr. Brear: “They should consider our stock, first for the market opportunity. If they believe the Internet is growing and they see that the network, the Internet is changing, that is the first thing I would ask. My position on that is I think we’ve just seen the beginning of the Internet and how the Internet is growing. If you agree that the Internet is growing, you will also agree then that the complexity in that is occurring and there is only one piece of technology that can help carriers address the complexity which they can in turn deliver services which is all the users, need. We need more services from our carriers.

We believe we are on a very exciting place right now. Independent analysts would say the market for DPI is growing exponentially. It is a billion dollar market over the next two years, growing from about 400,000 last year, just for those competitors I mentioned. We expect to be the leader in the market in less than 24 months and so we’ve got a great growth story.”

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“What we do, is give the service provider a new level of intelligence and confidence to be able to deliver a service. If that service is a game service, a video or voice service, in order to deliver those services, they must have a level of accuracy on understanding what is running over their network. That’s a fundamental requirement which we do very uniquely. There are several other things that we do. One is performance and scalability. We are four times the competition in terms performance and scalability. Additionally, we can implement and insert the technology anywhere in the network, from core to the edge, which is quite valuable to these carriers. - James F. Brear