Saying the company dominates the low end of the market, interim CEO Bill Roach told analysts on SonicWALL’s fourth-quarter earnings call yesterday that increased investment in research and development will help it break back into the mid-tier.

Our problem, that we’ve been quite open about, has been in the mid tier, Roach said. The company really neglected the development of new technologies and did not respond to trends toward more complex networks in that middle-size enterprise,

That’s what our roadmap focuses on and what’s going to turn us around, he said, adding that the recently released Pro 230 and Pro 330 Pro firewalls marked the start of that roadmap. There will be multiple product releases every quarter this year, he said.

Roach also added that up-selling SonicWALL’s existing customers is a priority. The company sells add-on anti-virus and content filtering services in partnership with Network Associates Inc’s McAfee unit and Websense Inc.

SonicWALL thinks 40% penetration of value-added services is industry typical, but Roach said that the current up-sell is far below that and that there is still a big untapped opportunity to sell value-added services into our installed base.

For the three months to December 31, the company reported a net loss of $89.7m, compared to a $4.8m loss a year earlier, on revenue down 31% at $23m. The big loss was mainly due to a new accounting rule. Pro forma loss was $250,000, versus a $6m profit.

For the year, the net loss was $93.9m, versus a $20.9m loss, on revenue that declined 8% to $103.2m. At the pro forma level, the company had a loss of $4.3m, versus income of $21.6m in 2001. The firm had over $125m in cash on its balance sheet December 31.

The fourth-quarter revenue decline, down 6% sequentially, was blamed mainly on the fact that the low-end SoHo and Tele firewall accounted for a greater percentage of sales, and that the company had to do some aggressive discounting.

We were able to bring some stability to our Pro lines, said Roach. As we anticipated we had to introduce stronger incentives to create demand for our older 200 and 300 products, but these incentives worked. The 200 and 300 lines had not been upgraded in three years.

Source: Computerwire