AT&T Boosts Avici's Q4

Avici Systems Inc. (Nasdaq: AVCI; Frankfurt: BVC7) reported an exceptional fourth quarter this morning thanks to increased Internet traffic at its largest customer, AT&T Inc. (NYSE: T).

The core routing also-ran reported earnings of $3 million, or 21 cents per share, on revenues of $15.9 million. (See Avici Reports Q4.) That compares favorably to the company's year-ago quarter, when it lost $8.6 million, or 67 cents per share, on revenues of $6.1 million.

The company said it expects to bring in revenues of between $45 million and $55 million in 2007, a projection that exceeds analysts' expectations. Avici shares were up $1.27 (16.84%) to $8.81 in late morning trading on Thursday.

As AT&T goes, so goes Avici. The carrier's increased Internet traffic needs helped boost Avici's quarter, and the router vendor expects the carrier to be responsible for about 90 percent of its total revenues.

Realizing that such a reliance on one customer is not sustainable, Avici announced the launch of a new business unit: Soapstone Networks. (See Avici Forms Business Unit.) The Soapstone unit will sell a software package to carriers to help them track how well their networks are meeting customer expectations and service-level agreements. The software is said to be based on standards that allow it to work regardless of what routing, switching, and networking equipment the carrier has installed.

Avici is not expecting to gain any significant revenues from Soapstone in 2007 and acknowledges that it will go into the year still relying heavily on AT&T in its core router business. Soapstone is expected to make a financial impact on Avici's earnings next year.

— Raymond McConville, Reporter, Light Reading