It has been a wild ride for Ribbon Communications, a global software leader in secure and intelligent cloud communications. The company has decades of history and in 2010, with the purchase of the carrier assets of Nortel, they went from a small company to what we called at the time a mini Alcatel-Lucent. The company was then known as GENBAND.
Regarding this acquisition, the then former of GENBAND, Charlie Vogt said:
We spent 20k staff hours looking at Nortel transaction. We spent twice as much time looking at this than anyone else according to Nortel.
This shows a deliberative approach that seems to be in the company’s DNA as you will see below.
Over the years, the company was quite innovative. They came up with a CPaaS solution called Kandy, a white-label VoIP solution and more. The idea was to provide carrier solutions as a service.
Then in 2017, the company merged with Sonus – another supplier to communications service providers. In November of 2019, the company announced it would merge with optical leader ECI Telecom Group Ltd. Some analysts were concerned this move was not in line with the software and service trajectory the company had been on.
Last week, Ribbon announced a new CEO, Bruce McClelland, a successful veteran in the communications and technology spaces. He worked for over 19 years at ARRIS in numerous management roles – eventually becoming the CEO.
We had an exclusive interview with Bruce we hope you find useful:
You have a strong background in engineering, how will that help you at Ribbon?
Ribbon is a tech company. To properly steer the ship means having good insight on networking evolution and how to plug the components in together. Working on the road map is a great CEO role. I get deeply involved in that. It is not just administratively running the company. I get involved technically. The Ribbon portfolio is similar to my experience – I have had long relationships with carriers as well and can add some value there; as well as improving engagement and trust with carriers and evolving the business. Four to five years ago, ARRIS embarked upon an enterprise strategy and those business lessons are helpful here.
How does your ARRIS experience help you at Ribbon?
I joined the company in 1999. At that point, ARRIS was small, sub half a billion-dollar company. We had a strategy to grow from a voice company, to data, to video, and finally enterprise. We executed and were able to sell the business for $6-7 billion. I want to have a similar track record here. I want to accomplish a similar path organically and, if necessary, inorganically.
Shareholders don’t reward companies that don’t grow. You have to be successful on the top and bottom line.
The integration of ECI is a big diversification step for the company. We spent a lot of time studying it. It is not as far afield as people think. It participates in core and edge; in mobile and fixed-line. All over a massive fiber network where ECI specializes. We can capitalize on these carrier relationships.
And more importantly, partner at the core of the network, where they prioritize capital spend.
How will things change with you at the helm?
My engagement model is different. I am heavily involved in the technology roadmap and strategy. Magic is created when you glue together technology three to five years from now with customers. We develop tight relationships, not gun-shot, rifle-shot. We are in deep together. We invest in how to evolve networks by releasing the right product at the right time.
It is easy to say but hard to do. My past experience will help in delivering similar success.
What are the company’s goals? Aspirations?
In the relatively short term: 18-24 months, our core Ribbon business will continue to move from hardware to software and virtualization. We are making lots of investments here. In the 2nd half of 2019, more than half of our revenue was from software sales.
This changes how you design, deliver and price; Our big focus is the transition to software. It improves margins and enables more secure relationships with customers.
We are also growing our enterprise and edge solutions. Our core Ribbon business is deeply embedded with carriers and the growth is at the edge of network… Selling with carriers and through carriers to the enterprise. This is the faster-growing part of the business.
The integration of ECI – we will sell more of their products to Ribbon customers in North America and Japan. We will show investors it is good acquisition and complimentary.
You’ve become a small Alcatel-Lucent with lots of hardware choices but you also have amazing services such as Kandy – can you do both of these successfully?
Kandy is a complete end-to-end managed service offering where we compete against other MSPs. Another aspect of our business is product-attached services – engineering and commissioning, from analog to digital. This is similar to my past experience at ARRIS and CommScope. We will continue to invest here.
The gross margins are different and the contribution amount is different… It is similar to hardware.
We want to grow the sales and contribution line – hardware has lower gross margins. We need to scale so cost is manageable, allowing us to invest in other things.
Earnings are most important. This is what matters to shareholders.
You can’t virtualize layer one. Being a really good company there and differentiating is a good place to be.
How does the merger of T-Mobile and Sprint affect you?
The industry has been waiting for this. Strong competing customers is good for vendors. We want them investing. We need competition for them to do this. We need them to have the wherewithal for CAPEX. The combination of these two accomplishes this – it can unlock the value of the Sprint spectrum.
This is good for a variety of equipment companies and service providers, including Ribbon.
On the other hand, we want more competitors but if they are not strong, then it is lost. This is good for consumers and the equipment industry.
The infrastructure upgrade in the next four-five years around 5G is a big deal for company… Enabling low latency, segmenting traffic on the network; targeted around 5G.
I feel good around our solutions in this space – segmenting wireless networks, small cells, etc. They need more fiber and connectivity.
Also VoLTE – many networks have not upgraded. The 5G upgrade cycle will be a catalyst for them to upgrade there as well.
Why should potential customers pick Ribbon?
I have known the company for 15-20 years – they have a rock-solid reputation for customers. They have trust in partners and this gives them a shot at every product they bring to market. We are a proven partner to major carriers and you have to have a good book of business to be successful.
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