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Entrada Faces Its Demons: Page 2 of 3

In April 2000, Entrada brought in a new CEO, Kanwar Chadha. The company
immediately enjoyed three quarters of revenue growth and positive cash flow
through January 2001, the end of Entrada’s fiscal year. For those first nine
months, Chadha was awarded a $93,000 bonus on top of his $141,000 salary.
(He was also awarded options to purchase 500,000 shares of stock at the
range of $3 to $4 a share, but with the options deep underwater, it’s
unlikely he will ever be able to exercise them.)

Buoyed by his success, Chadha hired more sales personnel and increased
research and development spending just when information technology
spending was slowing to a crawl. Sales of the company’s legacy frame relay
products plunged and anticipated increased sales of fast Ethernet LAN
products never materialized. Revenue fell from $8 million in the January
quarter to $1.3 million in the April quarter.

When the company’s earlier focus was frame relay products, it operated
under the name Sync Research, now the name of its frame relay division. Last year, the name was changed to Entrada after the frame relay business had
slowed and Chadha began rebuilding the company around its newly acquired SAN
routers unit.

Long-term holders of the company’s stock must be writhing. In 1995, the
stock traded at a split adjusted $276 a share. Even then, the company had a
mere $35 million in annual sales and couldn’t manage to stay out of the
red.

But in 1999, with revenues sagging and its frame relay products losing
their luster, the company had a one-for-five reverse stock split. That
boosted its sagging share price, which had plunged to 47 cents. Although
each investor ended up with one-fifth as many shares, each share was worth
more than $2, which gave the stock some liquidity to attract institutional
investors such as pension plans and mutual funds. (Virtually every
institutional investor shuns penny stocks and many even avoid $2 stocks.)