Procera Reduces Revenue Guidance

The Q2 earning call (here) was a tough one to James F. Brear, Procera's President and CEO.

Although he had good news (see "Procera Networks Wins Two New Tier-1 and Three New Tier-2 Customers in the Second Quarter" - here), James had to announce that the company lowers its 2010 revenues from $28M to a range of $20-28M.

According to James, the reason is shifting of opportunities to 2011 due to a long sales cycle while no opportunity was lost. In fact, in the two announced tier1 wins Procera replaced competitors.

Additional information provided:

• Procera sold during Q2 to 11 service providers, 7 of which are new, accounting all together to 64% of its revenues.
   
• The company has 14 going-on or planned trials with tier1 service providers
   
• One of the new tier1 deal, is with an [anonymous] North American MSO - a deal that James describers as the "the most significant event in Procera's history". This deal produces an order of $1M
   
• The company expects to start recognize from its Genband OEM (here) during Q4

This guidance update led to series of questions from Alex Kurtz from Merriman Curhan Ford who was clearly disappointed as Merriman just reiterated its 'Buy' for Procera on July 16 (here). To Alex's repeated question, James could not tell when the company was made aware of the delays. Procera shares closed at -9.3% on Friday, with higher than usual volume.

Looking at H1 revenues ($8.1M) Procera has to make $12-20M during H2 to meet its guidance compared to $6.2M  $14M made during H2 2009. Except for one tier1 order that should be recognized during Q4, no other indication for major revenue recognition was made.

I also wonder where are the $9.9M revenues from the orders announced during 2009 (see "Procera Networks Secures Large Follow-on Order" - here) as 10% customers were never mentioned by the company.