Cautionary Statement

This Quarterly Report on Form 10-Q, including the information incorporated by reference herein, contains, in addition to historical information, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are based on our current expectations, assumptions, estimates and projections regarding our business and industry, and we do not undertake an obligation to update our forward-looking statements to reflect future events or circumstances. We may, in some cases, use words such as "project," "believe," "anticipate," "plan," "expect," "estimate," "intend," "continue," "should," "would," "could," "potentially," "will," "may" or similar words and expressions that convey uncertainty of future events or outcomes to identify these forward-looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q may include statements about:

• our ability to attract and retain customers;

• our financial performance;

• our development activities;

• the advantages of our technology as compared to that of others;

• our ability to establish and maintain intellectual property rights;

• our ability to retain and hire necessary employees and appropriately staff our operations;

• our ability to manage growth, both in the United States and internationally;

• the spending of our proceeds from public offerings of our common stock;

• our cash needs; and

• our proposed merger with Cisco Systems, Inc.

The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties and other factors, including the factors set forth in Part II Item 1A "Risk Factors" in this Quarterly Report on Form 10-Q, that could cause actual results to differ materially from the results anticipated by these forward-looking statements. You should read these factors and the risks described in other documents that we file from time to time with the Securities and Exchange Commission, or SEC, in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and in the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2008.

References to "Starent Networks, Corp.", "registrant", "we", "us", "our" and similar pronouns refer to Starent Networks, Corp. and its consolidated subsidiaries.

Overview

Starent Networks is a leading provider of infrastructure hardware and software products and services that enable mobile operators to deliver multimedia services to their subscribers. We have created hardware and software products that provide core network functions and services, including access from a wide range of radio networks to the mobile operator's packet core network. Our products and services also provide management of subscriber sessions moving between networks and application of billing and other session policies. Our products and services provide high performance and system intelligence by combining significant computing power, memory and traffic handling capabilities with a flexible, high availability operating system and other proprietary software. Our products integrate multiple network functions and services needed for the delivery of advanced multimedia services, such as video, Internet access, voice-over-IP, e-mail, mobile TV, photo sharing and gaming.

Consumers and professionals are increasingly using mobile phones and other multimedia handheld devices to stay connected to each other, to access the Internet, to utilize business applications and for entertainment. At the same time, mobile operators are experiencing declining profits from voice services and increasing competitive pressures. To address these changes, mobile operators are deploying or planning to deploy next-generation wireless networks, such as third generation and fourth generation, or 3G/4G, networks, that are capable of delivering high quality, mobile multimedia services to subscribers. In deploying these new networks, mobile operators are seeking packet core network products and services that can deliver higher performance and functionality than has been available from products repurposed from wireline applications.

We have developed our multimedia core network hardware platforms, the ST16 and the ST40, and our proprietary software specifically to address the needs of packet-based mobile networks. Our products are designed to provide mobile operators with new revenue opportunities while also reducing their costs. Our products possess a high degree of system intelligence that allows a mobile operator to understand the details of each subscriber session, enabling individual subscriber management and network traffic flow control. Our products also offer high performance capabilities, such as high capacity, significant data processing rates and high transaction rates, which increase the efficiency of the network and enhance the mobile subscriber's experience. To increase reliability, our platforms employ hardware redundancy and high-availability software techniques. By integrating several network functions into a single element, we allow mobile operators to simplify their networks. We designed our products to be access independent so they can function across a range of 2.5G, 3G and 4G mobile and wireless radio access networks.

We sell our products and services to mobile operators around the world both directly and indirectly through our relationships with original equipment manufacturers, or OEMs, system integrators and distributors. We were founded in 2000 and our products were first used commercially by a mobile operator in the first quarter of 2003. Since 2003, our products have been deployed by over 100 mobile operators in over 45 countries.

We maintain our corporate headquarters in Tewksbury, Massachusetts, and have sales and development offices in various locations worldwide. We conduct our research and development activities at two locations in India and two locations in the United States. As of September 30, 2009, we had 1,009 employees worldwide. Our revenues for the year ended December 31, 2008, were $254.1 million and for the three and nine months ended September 30, 2009 were $86.0 million and $237.5 million, respectively. Our net income for the year ended December 31, 2008 was $60.5 million and for the three and nine months ended September 30, 2009 was $15.1 million and $43.1 million, respectively.

Recent Developments

Merger Agreement

On October 12, 2009, we entered into a definitive Agreement and Plan of Merger, which we refer to as the Merger Agreement with Cisco Systems, Inc., or Cisco, and Barcelona Acquisition Corp., or Barcelona, a wholly-owned subsidiary of Cisco. Pursuant to the terms of the Merger Agreement, and subject to the conditions thereof, Barcelona will merge with and into us and we will become a wholly-owned subsidiary of Cisco, which we refer to as the Merger. If the Merger is completed, our stockholders will be entitled to receive $35.00 in cash for each share of our common stock owned by them as of the date of the Merger. The consummation of the Merger is subject to customary conditions, including adoption of the Merger Agreement by our stockholders and expiration or termination of any waiting period (and any extension thereof) under the Hart-Scott Rodino Antitrust Improvement Act of 1976, as amended. Dates for closing the Merger and for our stockholders meeting have not yet been determined. We have made various representations and warranties and agreed to specified covenants in the Merger Agreement, including covenants relating to the conduct of our business between the date of the Merger Agreement and the closing of the Merger, restrictions on solicitation of proposals with respect to alternative transactions, governmental filings and approvals, public disclosures and other matters. Holders of shares of our common stock that are subject to vesting will only be entitled to receive merger consideration for such shares if and to the extent vesting conditions are met following the Merger. The Merger Agreement contains certain termination rights of Cisco and us and provides that, upon the termination of the Merger Agreement under specified circumstances, we will be required to pay Cisco a termination fee of $63.5 million.

Settlement of UTStarcom Litigation

On October 15, 2009, we agreed with UTStarcom, Inc. to settle all legal disputes between us. Under the settlement, we made a one-time payment to UTStarcom in the amount of $3.5 million and receive a perpetual royalty-free license to UTStarcom patents. Included in the settlement was the dismissal of two pending actions in the United States District Courts for the Northern District of Illinois (filed on May 8, 2007) and the Northern District of California (filed on February 16, 2005). During the three months ended September 30, 2009, we recognized the $3.5 million settlement payment as a charge to general and administrative expense.

Statement of Operations Components

Revenues

Our revenues consist of both product revenues and service revenues. We derive product revenues from the sale of our hardware products and the licensing of our software. Service revenues are generated from:

• maintenance and technical support associated with our software;

• hardware repair and maintenance services; and

• implementation, training and professional services.

We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable and collection is probable.

Mobile operators can purchase our products and license our software in various configurations, depending on their requirements for capacity, features and protocols. Typically, a mobile operator will use a small amount of equipment for testing and trial purposes and, once testing is complete, will purchase the necessary products to meet their initial capacity and feature requirements. As their capacity requirements increase, operators may purchase additional hardware or license additional software. The level of our sales is significantly influenced by the extent to which mobile operators make capital investments to enhance and expand their networks to provide multimedia services. Mobile operators' capital investments will be influenced by the demand for multimedia services by their customers.

We offer our products and services through our direct sales force to mobile operators and indirectly through relationships with OEMs, system integrators and distributors. The OEMs, system integrators and distributors generally purchase our products after they have received a purchase order from their customers and do not maintain an inventory of our products in anticipation of sales to their customers.

We believe our revenues will vary significantly from period to period as a result of the following:

• Fluctuations in the timing of customer orders. Mobile operators require significant lead times to incorporate changes and enhancements into their networks to ensure the various network components are interoperable. These lead times and interoperability testing requirements result in an extended sales cycle and can lead to uneven purchasing patterns. In addition, our reliance on a relatively small number of customers contributes to the variability of our revenues.

• The timing of revenue recognition in relation to the shipment of products. Our products contain software which is not incidental to our products. We are often required to defer recognition of revenue for a significant period of time after shipment, as a consequence of certain features of our customer arrangements (such as customer acceptance provisions), as well as the requirement that we establish company-specific evidence of the fair values of our products and services.

The variability of our revenues directly impacts our operating results in any particular period since a significant portion of our operating costs, such as personnel costs, depreciation expense and sales commissions are either fixed in the short term or may not vary proportionately with recorded revenues.

Cost of Revenues

Cost of revenues consists of costs of products sold and services provided. Cost of products consists primarily of payments to a third party manufacturer for purchased materials and services as well as internal costs, such as salaries and benefits related to personnel, provisions for inventory obsolescence, related overhead and share-based compensation. The use of an outsourced

manufacturer enables us to conserve working capital, adjust to fluctuations in demand and provide for timely delivery to our customers. Cost of services consists primarily of salaries, benefits and share-based compensation related to professional services and technical support personnel, product repair costs, depreciation and related overhead.

Gross Profit

Our gross profit has been, and will be, affected by many factors, including the demand for our products and services, the average selling price of our products, which in turn depends on the mix of product configurations sold, new product introductions, the region of the world in which our customers are located, the volume and costs of manufacturing our hardware products and the cost associated with implementing our products in our customer networks.

Operating Expenses

Our operating expenses consist primarily of personnel costs, including salaries, commissions, bonuses, share-based compensation and related benefits and taxes; prototype costs related to the design and development of new products and enhancement of existing products; and consulting, travel and depreciation expenses. The expenses are classified into the following categories for reporting purposes: research and development, sales and marketing and general and administrative. The following is a brief description of the key types of expenses in each of these categories:

• Research and development expense consists primarily of personnel costs, prototype costs, consulting services and depreciation. Research and development activities, including hardware and software development and quality assurance testing, primarily occur at two locations in the United States and two locations in India.

• Sales and marketing expense consists primarily of personnel costs, consulting services, travel and marketing programs such as trade shows. Commissions are a significant component of our sales personnel costs and are recorded as expense when earned, which is not necessarily directly proportionate to the amount of revenues recorded.

• General and administrative expense consists primarily of personnel costs related to our executive, finance, legal, human resource and information technology organizations, professional fees, insurance and other related overhead expenses.

Other Income and Expense Items

Interest Income

Interest income primarily consists of interest earned on cash and short-term investments. We have historically invested our cash in money market funds and other short-term, high-grade investments.

Foreign Currency Exchange Gain (Loss)

Foreign currency gain (loss) primarily consists of foreign currency transactions with international customers and our foreign subsidiaries. The functional currency of our foreign operations is the U.S. dollar. Accordingly, all assets and liabilities of these foreign subsidiaries are remeasured into U.S. dollars using the exchange rates in effect at the balance sheet date, with the exception of certain non-monetary items which are remeasured at historical rates. Revenues and expenses of these foreign subsidiaries are remeasured into U.S. dollars at the average rates in effect during the year.

Income Tax (Expense) Benefit

Our income tax expense consists of provisions for income taxes in both the United States and foreign jurisdictions. We provide for income taxes during interim periods based on the estimated effective tax rate for the full fiscal year and record certain discrete items in the period in which they occur, such as incremental tax deductions related to employee stock options as well as changes in tax position uncertainties. Our income tax benefit consisted primarily of a one-time tax benefit due to the release of a substantial portion of the valuation allowance recorded against net deferred tax assets in the United States,

Application of Critical Accounting Policies and Use of Estimates

Our financial statements are prepared in accordance with generally accepted accounting principles, or GAAP, in the United States of America. The preparation of these financial statements and related disclosures require us to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ significantly from these estimates under different assumptions or conditions.

Our critical accounting policies are those that require application of management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Our critical accounting policies are described in the Management's Discussion and Analysis of Financial Condition and Results of Operations section included in our Annual Report on Form 10-K for the year ended December 31, 2008. There have been no significant changes to our critical accounting policies since December 31, 2008.

Results of Operations

Revenues

The following table sets forth our revenues by type and geographic location of
our customers.



                                            Three Months Ended                                               Nine Months Ended
                                               September 30,              Period-to-Period Change              September 30,               Period-to-Period Change
                                            2009           2008              $                  %           2009           2008               $                  %
                                                            (dollars in thousands)                                          (dollars in thousands)

Revenues:
Product                                   $  73,160      $ 55,450      $       17,710             32 %    $ 202,119      $ 156,497      $       45,622             29 %
Percentage of revenues                           85 %          84 %                                              85 %           85 %
Service                                      12,810        10,611               2,199             21         35,372         26,960               8,412             31
Percentage of revenues                           15 %          16 %                                              15 %           15 %


Total revenues                            $  85,970      $ 66,061      $       19,909             30 %    $ 237,491      $ 183,457      $       54,034             29 %


Revenues by Customer Type:
Direct                                    $  59,157      $ 54,070      $        5,087              9 %    $ 194,624      $ 163,391      $       31,233             19 %
Percentage of revenues                           69 %          82 %                                              82 %           89 %
Indirect                                     26,813        11,991              14,822            124         42,867         20,066              22,801            114
Percentage of revenues                           31 %          18 %                                              18 %           11 %


Total revenues                            $  85,970      $ 66,061      $       19,909             30 %    $ 237,491      $ 183,457      $       54,034             29 %


Revenues by Geography:
United States and Canada                  $  59,541      $ 54,977      $        4,564              8 %    $ 195,819      $ 164,619      $       31,200             19 %
Percentage of revenues                           69 %          83 %                                              82 %           90 %
Japan                                        20,670         6,788              13,882            205         31,208         11,927              19,281            162
Percentage of revenues                           24 %          10 %                                              13 %            7 %
Korea                                           842         3,427              (2,585 )          (75 )        2,558          5,501              (2,943 )          (53 )
Percentage of revenues                            1 %           5 %                                               1 %            3 %
Rest of world                                 4,917           869               4,048            466          7,906          1,410               6,496            461
Percentage of revenues                            6 %           1 %                                               3 %            1 %


Total revenues                            $  85,970      $ 66,061      $       19,909             30 %    $ 237,491      $ 183,457      $       54,034             29 %

Revenues increased $19.9 million, or 30%, during the three months ended September 30, 2009 compared to the same period in 2008, due to an increase in product revenues of $17.7 million and an increase in service revenues of $2.2 million. Product revenues, which include hardware and software, increased primarily due to product shipments in the United States, Canada and Japan for which we received customer acceptances and recognized revenue during the three months ended September 30, 2009 as compared to the same period in 2008. The $2.2 million increase in service revenues for the three months ended September 30, 2009 compared to the same period in 2008 was due to an increase in the amount of our products installed at mobile operators, which is generally the basis of maintenance and service fees. Direct revenues increased $5.1 million, or 9%, primarily due to increased sales to existing customers. Indirect revenues increased $14.8 million, or 124%, primarily due to the initial recognition of revenue related to a new customer in Japan.

Revenues increased $54.0 million, or 29%, during the nine months ended September 30, 2009 compared to the same period in 2008, due to an increase in product revenues of $45.6 million and an increase in service revenues of $8.4 million. Product revenues, which include hardware and software, increased primarily due to product shipments in the United States, Canada and Japan for which we received customer acceptances and recognized revenue during the nine months ended September 30, 2009 as compared to the same period in 2008. The $8.4 million increase in service revenues for the nine months ended September 30, 2009 compared to the same period in 2008 was due to an increase in the amount of our products installed at mobile operators. Direct revenues increased $31.2 million, or 19%, primarily due to increased sales to existing customers. Indirect revenues increased $22.8 million, or 114%, as described above.

Cost of Revenues and Gross Profit

The following table sets forth our cost of revenues and gross profit.



                                        Three Months Ended                                              Nine Months Ended
                                           September 30,             Period-to-Period Change              September 30,              Period-to-Period Change
                                        2009           2008               $                 %          2009           2008                 $                %
                                                                                       (dollars in thousands)

Cost of revenues:
Product                               $  10,100      $ 10,151      $           (51 )         -1 %    $  29,711      $  28,697      $            1,014         4 %
Percentage of related revenues               14 %          18 %                                             15 %           18 %
Service                                   6,405         4,107                2,298           56         16,957         11,823                   5,134        43
Percentage of related revenues               50 %          39 %                                             48 %           44 %


Total cost of revenues                $  16,505      $ 14,258      $         2,247           16 %    $  46,668      $  40,520      $            6,148        15 %

Percentage of revenues                       19 %          22 %                                             20 %           22 %

Gross profit:
Product                               $  63,060      $ 45,299      $        17,761           39 %    $ 172,408      $ 127,800      $           44,608        35 %
Product gross margin                         86 %          82 %                                             85 %           82 %
Service                                   6,405         6,504                  (99 )         (2 )       18,415         15,137                   3,278        22
Service gross margin                         50 %          61 %                                             52 %           56 %


Total gross profit                    $  69,465      $ 51,803      $        17,662           34 %    $ 190,823      $ 142,937      $           47,886        34 %

Gross margin                                 81 %          78 %                                             80 %           78 %

Product gross margin increased four percentage points to 86% during the three months ended September 30, 2009 as compared to the same period in 2008 due primarily to a higher proportion of software revenue relative to the mix of hardware and software sales in the quarter compared to the prior year. We expect product gross margin to decrease somewhat during the remainder of 2009 due to the expansion of our customer base in certain geographies.

The $2.3 million increase in cost of services for the three months ended September 30, 2009 as compared to the same period in 2008 was primarily due to higher personnel and overhead costs primarily related to the addition of 50 customer support personnel. Service gross margin decreased eleven percentage points to 50% during the three months ended September 30, 2009 as compared to the same period in 2008. The decrease in margin was due to the increase in expenses described above. We anticipate cost of services will increase during the remainder of 2009 as we continue to expand our customer support organization geographically in future periods; however, we believe service gross margins will increase modestly as we add costs at a slower rate.

Product gross margin increased three percentage points to 85% during the nine . . .