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Applications delivered across Intranets, Extranets, and the Internet

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Technology
Computer Services
NASD: PKTR

Packeteer, Inc.

10495 N. DeAnza Boulevard
Cupertino, CA 95014
Phone: 408-873-4400


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Craig W. Elliot
President and
Chief Executive Officer

Interview conducted by:
Diane Reynolds, Co-Publisher

CEOCFOinterviews.com
April 2002

Company Profile:

Packeteer is a leading provider of application performance infrastructure systems that give enterprises and service providers a new layer of control for applications delivered across intranets, extranets, and the Internet.  Packeteer’s products powered by PacketWise software ensure end to end quality of service (QoS) for networked applications and managed services, enhancing the quality of experience for users through comprehensive bandwidth, traffic, content, service-level, and policy management.  Packeteer’s products are deployed by Global 2000 corporations and service providers and are sold through more than 100 resellers, distributors, and integrators in more than 50 countries.

Brief Biography of President/CEO

 Craig W. Elliott has served as president, chief executive officer and director of Packeteer since joining the company as employee number four in April 1996.  Elliott secured more than $20 million in private funding prior to leading the company through its successful initial public offering (IPO) in July 1999.  Elliott previously spent 10 years with apple, where he held a number of executive positions in sales, marketing, business and product development, overseeing programs in 80 countries.  He was also responsible for the development of strategic alliances for the company’s networking and communication products and the Internet and online business groups.  Elliott is a published author and a frequent speaker at Net world + Interop, PC Expo, Technologic Partners and Red Herring Magazine events as well as financial conferences sponsored by Robertson Stephens and Hambrecht & Quist.  Elliott holds a B.S. from Iowa State University.

Ceocfointerviews: Please explain to my readers a bit about your company and what you are accomplishing today.

Mr. Elliott: Packeteer has been in the business for about six years and our mission has been pretty consistent.  With a wide variety of traffic on corporate networks we see challenges that the CIO has in keeping is mission critical and applications running and in a consistent performance.  So, we sell a series of products that allows him to control the performance of applications across the network.

Ceocfointerviews: It’s not just the network; it’s the Intranet, the Extranet and all the different areas.

Mr. Elliott: Yes, it’s interesting. The CIO who had a relatively confined network a few years ago, probably has difficulty today mapping out what part of the network he really owns.  Today, much as you described there’s not only the internal corporate network, but there are third party suppliers that may connect, customers that connect at websites and the Internet at large.  It’s important with all of the different types of traffic that flows across the network that the CIO’s in control so he can start to give guaranteed rate and priority to the most important applications.

Ceocfointerviews: Do you handle the security end of it?

Mr. Elliott: I guess only on one front -- security begins to become an issue for us when it affects performance.  There are a number of issues around denial of service attacks; another area where the performance of a network can be severely impacted.  We are always are managing application performance and network performance.  Not as much in the strict sense of a firewall, but making sure there is nothing that can overflow the network to the detriment of the important applications.

Ceocfointerviews: I think a while back there was someone getting into the networks and jamming them up.

Mr. Elliott: We see that a lot.  It’s interesting that maybe a malicious attack by a hacker with a denial of service attack where they create an application that floods a network, or it could be less malicious where employees are just forwarding large files back and forth.  Quite frankly, it has the same performance impact. It slows the important applications, the financial applications or ERP applications within a company and whether it’s malicious or not it is still considered to be a performance virus on the network.

Ceocfointerviews: Do you do this through software that you develop and then sell?

Mr. Elliott: We have a combination of hardware and software. It’s a device that comes pre-configured with our software, and it sits on the network between the high-speed connection of the local area network and low-speed wider-end Internet connection.  From there, we can see all of the different traffic types, identify them and allow a CIO or network administrator to set a series of policies that can tune the network so they can meet their business objectives. 

Ceocfointerviews: So, what you are supplying is very flexible depending upon the needs of your customers?

Mr. Elliott: That’s the plan, in fact when we talk about application performance it can be any one of 350 applications we automatically recognize or we can configure a product so that applications that have been custom written by a CIO’s group or IT group within a large corporation and be managed to give guaranteed predictable performance across IP networks.

Ceocfointerviews:  Are you able to keep up with the demands with this changing technology and are you able to provide your customers now as well as new ones with this changing technology?

Mr. Elliott: Customers who buy service contracts with us get ongoing updates so they can handle the latest applications and latest issues on networks.  We also see another trend in which is interesting thing the high performance of the PCs that are available on desktops today.  I know my desktop PC is over a gigabyte of ram and over 80 gigabyte of hard drive. Those new enhancements to PC technology put a particular strain on networks. Large files that we wouldn’t have considered using until recently -- a 30 or 40-megabyte file -- now becomes commonplace.  A Power Point presentation I did on Wall Street a few weeks ago was 30 megabytes. If I attached that file and sent it to you it would wreak havoc with the network between us..  So, we see a lot of trends in the industry really going our way.  Our ability to continue to deliver new applications and performance management with new applications is something we can do on an ongoing basis with the technology we provide.  We also see technical trends in the industry that really make this a must-have technology.

Ceocfointerviews: Who is your customer base?

Mr. Elliott: Our customer base seems to be the Global 2000, large global companies.  The more geographically disbursed a company is, the more wide area network connections they have and the more expense they have associated with their network and they’ve got a great value proposition in our product.  So, large corporations, particularly worldwide corporations have been the majority of our business.  We’re also seeing a lot of interest from service providers now as they try to deliver more than just bandwidth to their customers -- the service level guarantees are on how the applications perform. 

Ceocfointerviews: So it’s a whole new area that you are addressing?

Mr. Elliott: It’s actually, we are still addressing those large corporations but we are now accessing them through their service providers.  So, companies like AT&T, NTT, and EQUANT now offer our product on top of the connectivity that they provide, so they are not just offering the bandwidth but actually bandwidth with performance guarantees. 

Ceocfointerviews: Now you just mentioned three of your key partners there.  How important are they to the growth of this company?

Mr. Elliott: We think over time that service providers on a global basis will be a very significant part of our revenue.  Right now we are just getting started with them.  They’re great customers of great delivery mechanism and ours in large corporations.  I suggest that in three-to-five year time frame they will be well over half of our overall business. 

Ceocfointerviews: Who else would you like to address that isn’t on your plate, yet?

Mr. Elliott: There are a number of customers out there.  What is also interesting is that by the nature of our product it doesn’t just work on wired connections but it also works on wireless and satellite, DSL and cable.  We are really completely independent of the transport of the connectivity method.  We start to see new services and service providers in this area we think significant opportunity there and in the future as well.

Ceocfointerviews: Do you have the manpower to handle the growth?

Mr. Elliott: I believe so.  We continue to hire people we had good growth in our business even through the very tough time in our economy last year.  We grew the company over 15% year over year.  We continue to grow on a global basis, so we’ve been able to attract the right type of employees that we think is a very high growth area.

Ceocfointerviews: Six years ago this company formed and it was during the time of the .com industry and lots of companies during that time have faded away and disappeared.  It’s interesting that your company has stayed abreast of the technology and afloat.

Mr. Elliott: I think it’s actually more than just technology.  From our standpoint it has been a focus on large corporations delivering a significant value proposition.  Helping CIOs get control of their network and cost infrastructure and giving a good return on investments.  We were a part of that heyday but I think we are a very realistic company with value propositions and selling to large corporations.  We raised $63 million dollars in the IPO over two and a half years ago.  We have over $62 million dollars in the bank and we continue to invest in the growth of company, but we run this as a good business with a long-term prospect. 

Ceocfointerviews:  How do you handle your customer support and service?

Mr. Elliott: When you are dealing with large global corporations, that is an absolute requirement.  They don’t do business without companies that can professionally answer their questions and complicate a network environment.  So, one of the things that we did early on in the company is develop a worldwide support infrastructure.  We have training and support facilities in Tokyo, Hong Kong, Australia, Amsterdam and the United States.  We cover all time zones and a variety of different languages as well so we can handle the large needs of our global corporations as well. 

Ceocfointerviews: What would you say was your biggest challenge over the last year or two?

Mr. Elliott: Besides my one year old and getting a good night’s sleep?  (laughs) Our biggest challenge has been educating our customers and showing them the opportunity here.  Our technology is true invention, it’s new technology in this space and it’s incumbent upon us to go out and show them that a best effort PC IP Network can operate at a better than a best effort manner by putting our technology in and really allowing them to get control of their applications.  It’s been fun. It’s fun to see their eyes light up when they see that technology can put them back in control.  That continues to be our job, letting people know about the solutions that we have.

Ceocfointerviews: You have the Policy Center, Report Center, the AppCelera and the AppVantage.

Mr. Elliott: We take some of our basic technology and we apply it to a number of scenarios.  The AppVantage line is specifically created for service providers.  We take some of the same bandwidth management and application technology that we provide to large corporations in our packet shaper line and we created special versions of that to allow service providers to sell it at a monthly basis to their customers.  The AppCelera technology is a new technology we brought to the market that we are very excited about; it allows people to accelerate the performance of their critical websites.  We’ve seen up to a 500% improvement and performance by applying this technology before a mission critical website to decrease the amount of time that is required for downloading important information.  The policy center and report centers tools help people manage large employments of our product.  We have companies like Charter Communications that have in excess of 350 packet shapers in their network.  We need to have centralized reporting and policy management tools to allow them to affectively and easily manage those deployments.  We try to have a complete product line and solutions that allow people to handle their issues and applications performance management. 

Ceocfointerviews: Acquisitions? Joint Ventures? Partnerships?  Where does the bulk of this company’s growth come from?

Mr. Elliott: We think it is a combination of all of the above.  As a matter of fact, the AppCelera product line which we brought to market last year was via an acquisition of a company in British Columbia we acquired about a year and half almost two years ago.  We’ve been able to take that technology productive it bring it to market and we’ve a great R&D team, I was just in Canada last week working on new products as well as a great team here growing this company organically.  So, you’ll see this continue to work in a combination of ways.  As you mentioned, there are a lot of companies who have had challenges from a financial perspective and our strong finances as well as strong distribution channel give us a great opportunity to acquire technology and successfully get it to market.

Ceocfointerviews: Going forward, do you see any stumbling blocks that may stop you from making any additional acquisitions?

Mr. Elliott:  No, but you have to be careful about those and you have to make sure you make those decisions carefully.  We have to make sure they align towards our major mission and goal of application and mission management.  As long as they are in alignment with that I think that acquisition is a strategy we can use on a go forward basis.  But you won’t see us veer off the vision we once say six years ago we think it is more relevant today than when we first started the company. 

Ceocfointerviews: What is it you feel makes this company uniquely positioned over a competitor?

Mr. Elliott: It would be easier for me to run through a list of the technical features we have that we think beats the competition hands down, but at the end of the day CIOs are looking for benefits. What we have more than anything else is experience with dealing with large global corporations and being out in those environments. Shipping out products for five years has given us a phenomenal amount of expertise in the variety of different applications and traffic types that are out there.  I think the internal expertise at the end of the day is what allows us to win the vast majority of deals. 

Ceocfointerviews: As a potential investor looking at your company for the first time, what would you say to them to convince them to choose you over the other companies in this sector?

Mr. Elliott: If you start to think of the challenges we have going forward, the amount of traffic being generated, the amount of power you have sitting on your desktop and you combine that with the complicated environments that are out there, what we do is allow people to implement and control what is out there in those environments. Everyone can relate to trying to get important information from the internet and closing the books from a financial standpoint, and all of a sudden everything slowed down and you can look at the cube to the left or right to see Sports Illustrated website up or someone else having something up browsing. I think people can internalize what is going on in network communications today and being able to get control of those situations is going to be a critical item for CIO’s -- a must have technology.  That is what I try to invest in -- “must have” technology. 

Ceocfointerviews: As a closing statement, is there something you would like to add that I might have overlooked to get out to my readers?

Mr. Elliott: We’re very excited about the opportunity ahead of us.  We spent a lot of time and hard work at trying to understand how these networks work, what the challenges are out there and again I think we are executing the opportunity and we only see an increase going forward.  I think the other thing is that going forward in tough economic times, a lot of people consider them challenging. We, on the other hand, see it as a way to return on an investment. An optimization of resources starts to become much higher priority for CIOs and that’s exactly the kind of tools that we have.  We see it as an opportunity when times are tough when we can go in to companies and show them our technology and how they can save money.

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