Procket Networks COO resigns

"Vito has decided to resign, effective today, to pursue other opportunities outside of Procket," Roland Acra, the company's chief executive officer, said Tuesday. "I wish him luck and success in future endeavors."

The change in upper management comes at a time when Procket, one of the most closely watched start-ups in Silicon Valley, is beginning to gain traction with customers. The company makes gear used by Internet service providers and telephone companies to shunt huge amounts of data at high speeds across the Internet. It has raised more than $277 million in funding and is working to close another round, according to Acra.

Erik Suppiger, an analyst with Pacific Growth, believes Palermo was squeezed out of the company.

"Under the new management structure, it seemed (Acra) didn't see much of a place for Vito," Suppiger said. "Vito's role had been reduced, and I think he wanted to move on."

Acra denied that Palermo was forced to leave. Palermo could not be reached for comment.

Palermo was appointed chief financial officer of Procket in July 2001. He later became chief operating officer. In June 2003, Randall Kruep resigned from the CEO position, and Paul Matteucci, one of the company's venture backers, served as interim CEO. But sources close to the company said it was Palermo who ran most of the daily activities at the company until Acra took over in January of this year. Palermo had been a candidate for the permanent CEO position, but was passed over when the company appointed Acra.

Procket also on Tuesday announced its largest customer win to date. The company beat out market-leading routing vendors Cisco Systems and Juniper Networks to supply Australia's Research and Education Network (AARNet) with its routers.

Financial details of the deal with AARNet weren't disclosed, but Bieberich said he believes the contract will be worth between $5 million and $10 million over the next two years.

"It's not a huge contract," he said. "But any announced customer at this stage in Procket's lifecycle is positive."

Procket has announced contracts with other organizations, including Stealth Communications, NTT, the University of Central London and Cambridge University. But it still has a long way to go before it becomes a serious threat to Cisco and Juniper, which dominate the core router market with a combined market share of more than 90 percent.

Most of Procket's wins to date have been for research networks. The only major service provider win that has been announced is NTT. But for the start-up to truly take on Cisco and Juniper, it will need to rack up more carrier wins, said Mark Bieberich, a senior analyst with The Yankee Group.