With a recent boost from the federal government and enterprise customers, router vendor Foundry Networks is making an aggressive drive into the service provider space this year, adding new products and beefing up its sales staff while promising growth among big-name customers in the back half of 2007.

In a typically slow season, Foundry's first-quarter revenue grew 19% from a year earlier to nearly $136 million, beating Wall Street's expectations by 6%. Although the good news was driven mostly by U.S. business and federal government customers (55% and 18% of sales, respectively), the vendor is also seeing a lot of traction among service providers. With initial purchase orders from major Tier 1 providers in the first quarter, CEO Bobby Johnson said, “My expectation for major Tier 1 penetration begins in the second half of this year.”

Sales of Foundry's MPLS routers, the NetIron XMR core router and the MLX metro Ethernet router, grew 12% sequentially to contribute 16% of total revenue in the first quarter. Since their launch a year ago, they've been shipped to 230 customers, including — according to UBS Investment Research — Comcast, NTT, Limelight, Sprint (in support of WiMAX deployment) and Vonage.

Last month Foundry began offering packet over Sonet (PoS) cards for both products. The vendor's foray into PoS is a late entry in a market expected to decline going forward, but the gear is priced to move. “With price points nearly one-half the cost of equivalent ports on competitive gear, service providers will be motivated to take a close look at the NetIron proposition,” Glen Hunt, principal analyst for Current Analysis, wrote in a recent report.

During its last earnings call, Foundry promised to introduce new gear at the N+I trade show this month that will double the performance of the XMR and MLX, supporting up to 128 10 Gb/s Ethernet ports.

In the fast-growing router market, there may be room for Foundry to advance, but it won't be easy. The vendor was sixth last year in the global service provider router/switch market, according to Synergy Research — behind Alcatel, Avici Systems, Cisco Systems, Juniper Networks and Redback Networks (now Ericsson).

Another competitor with comparable market share, Extreme Networks, has struggled with execution problems lately, which could offer more opportunity for Foundry. But even market titans such as Alcatel and Cisco are growing quickly, raising the bar for smaller players. And if Foundry wants to compete on the high performance and density of its gear, said Eve Griliches, analyst for IDC, “Force10 has the biggest, baddest switch out there.”

The service provider drive is in some ways a return for Foundry. At the peak of the telecom bubble, the majority of its revenue came from service providers. But when that bubble popped, the company spread out, finding the federal government to be a dependable customer. Now Foundry wants to reduce its reliance on the feds.

“We still have some legacy customers and some very astute sales and support people for [service providers], and we're hiring new service provider sales guys,” Johnson said, vowing to hedge his bets more this time around. “We're still smarting from our concentration on service providers in 2000 when the bust came.”