Mobile operators today are experiencing some of the most dramatic changes to their business models since the advent of mobile communications. These changes are the result of increased competition among mobile operators, the decline in average revenue per subscriber from voice communications and the rapid increase in mobile subscriber demand for data-rich multimedia services. To address each of these trends, mobile operators are dramatically increasing the data services provided through their networks.

For example, Verizon Wireless reported that data services grew from 9.8% of subscriber revenue in the fourth quarter of 2005 to 15.8% in the fourth quarter of 2006. This trend is expected to continue. Strategy Analytics, an independent research firm, forecasts that data services will account for 24% of subscriber revenue by 2011. According to Strategy Analytics, global mobile data services revenue is expected to grow 15% annually over the next five years from $106 billion in 2006 to $200 billion in 2011.

Several factors are accelerating the growth of data-rich multimedia traffic on mobile wireless networks. The number of mobile subscribers worldwide continues to grow as established markets experience increases in subscriber penetration and developing countries adopt mobile communications more rapidly.

According to Wireless Intelligence, an independent research firm, the number of worldwide mobile connections is expected to grow 50% from 2.7 billion in 2006 to 4 billion in 2010. Another factor is the increasingly mobile and interconnected society in which information is accessible and communications are available all the time regardless of location.

The ST16 is a robust hardware platform that combines high capacity, availability and performance with subscriber and network intelligence. The ST16 is radio access-independent and can be deployed in multiple mobile network environments, including CDMA2000 1X, 1xEV-DO Rev. 0 and Rev. A, GPRS, UMTS networks and, the Company anticipates in the latter half of 2007, WiFi and Mobile WiMAX networks.

The ST16 consists of a chassis, application or processing cards and line cards. The application or processing cards provide system management and process all network functions and services. The line cards provide the physical connection to the network.

The ST16 is capable of providing multiple network functions and in-line services.

The ST16\\\\\\\'s processing power and abundant memory are designed to enable mobile operators to integrate multiple in-line service capabilities into the core network. In-line services that the Company currently offers or plans to offer in the future include enhanced charging and billing, intelligent traffic control, peer-to-peer detection and control, stateful firewall and content filtering. Mobile operators can deploy in-line services along with required core network functions such as a PDSN, GGSN, Home Agent or ASN Gateway.

The Starent Web Element Management System, or EMS, is a centralized service and network element management product that controls the ST16. Starent Web EMS is a multi-service element manager, which provides fault, configuration, accounting, performance and security functions through a graphical user interface. Starent Web EMS enables mobile operators to monitor, manage and control the performance of the ST16, as well as integrate and interoperate with other components and network management systems. The Starent Web EMS also provides a variety of performance and operation records based on mobile operator defined parameters.

Total cost of revenues was $27.7 million for the year ended December 31, 2006 and $13.6 million for the year ended December 31, 2005, an increase of $14.1 million, or 103%.

Total operating expenses were $64.8 million for the year ended December 31, 2006 and $45.2 million for the year ended December 31, 2005, an increase of $19.6 million, or 43%.