Redback Networks’ relationship with its rival and key reseller Alcatel thinned in the first quarter. Though Alcatel contributed 12% of Redback’s revenue last year, it contributed only 5% of Redback’s revenue in the first quarter.

That drop-off doesn’t signify any change in the relationship between the two vendors, said Redback Chief Executive Officer Kevin DeNuccio. But what changes may come over time, he said, “remain to be seen.”

“We’re going to continue to call directly on customers, as we have been,” he said. “That’s why we’ve been ramping our sales force. I do feel that the relationship [with Alcatel] is going to live on, although we’ll continue to have overlap, so we’re going keep control of our own destiny.”

Redback ended March with 555 employees, up from 505 three months earlier. The company is still hiring and expects a “significant expansion” of its sales and engineering teams this quarter.

Redback and Alcatel partnered to win a contract to supply British Telecom’s 21st Century Network, but although Redback has begun shipping products to BT, it won’t receive revenue from the sale until it delivers the necessary software, perhaps toward the end of this year.

Redback reported strong results overall for the first quarter. Its revenue was up 21% sequentially and 69% from a year earlier, to $57.9 million. Its net loss was $2.6 million, or $0.05 per share, down 63% from a year earlier. Sales of its SMS gear in particular were higher than anticipated in the first quarter, at $9.6 million, and should be again in the second quarter, driven by North American DSL growth, the company said. Sixty-four percent of Redback’s total first-quarter revenue ($37.2 million) came from North America.

BellSouth and AT&T both contributed more than 10% of Redback’s first-quarter revenue. Redback’s biggest customer, BellSouth, is now “in full rollout of its triple-play [network],” DeNuccio said. Redback’s gear is now deployed in more than half of the carrier’s points of presence (with one or two Redback chassis per central office) and in some cases carrying live traffic. “It’s going live as we speak,” he said.

When asked how BellSouth’s pending acquisition by AT&T might affect Redback, DeNuccio said, “We’re getting positive feedback from both [AT&T and BellSouth] on our position today. The state of the SmartEdge rollout at BellSouth is very secure.”

In a research note, Morgan Keegan analyst Simon Leopold predicted BellSouth might send between $110 million and $176 million Redback’s way over the span of two or three years. He also warned that Redback’s September quarter could be soft if BellSouth spending tapers off before BT spending kicks in.