It is not exactly as if Juniper or Cisco or Alcatel or any other router incumbent are looking for router IP -- they have got it in spades. Anybody looking to enter the router market would probably want to take a fresher approach than Avici's 1990's era architecture -- like one of the scores of VC-backed start-ups out there.
It's like I try to tell my wife: buying something just because it's cheap still takes money, and then you have to find someplace to put it.
Saying the layoffs position the company to be sold is disingenuous -- you would leave those specific decision (i.e., which programs to shut down, which to keep alive, and finding where 'synergies' may be had) to a potential buyer. My guess is that they shopped the company around, found no takers, and have decided to try to make the limited cash reserves last as long as possible by downsizing the staff. That allows senior management to live off of the coporate payroll for an indefinite period.
Let me play devil's advocate for a minute here, but who would buy them? Highly unlikely in my opinion that the company will be sold.
JNPR, CSCO - doubtful given all their investment they made in their core routers. Alcatel, Lucent, Nokia, Siemens- occupied with their own acquisitions/business. Nortel - no way in hell Nortel will be acquiring anyone. Nortel is likely to sell itself.
I think the for sale sign is out. There has been no insider selling. So my guess is the price being tossed around is above or near the high end of this year's trading range. That is my observation. I do think there is a ton of negative sentiment, well deserved, against the company. Management has a sense that it is best to sell off the co., and thus did the big cost cutting and streamlining. The rest is figuring out a price. The idea that they would just sit there and run out of cash is isn't what the big cost cutting hinted at.
The Avici CEO is vocally defending the company's position at AT&T post merger, and the company had a blowout Q1. On the other hand, Avici has announced it will layoff 45% of its staff and former partners Huawei and Nortel are no longer working with the company (as disclosed in the company's SEC filings).
Yes, a multi-vendor strategy makes sense, but not when one of those vendors has a aging product set with a fading roadmap. At some point, it costs more to maintain a multi-vendor strategy than it does to ditch it. IF Avici is on the way out of AT&T, its balance sheet will gradually drain away and no one will want to buy it.
But that is just common sense and quoting the public record. My guess is the stock is going back to where it was before they released Q1 results (i.e., between $4-4.50) or lower, but I tend to have a bearish view on most things. It would be interesting if someone on this board could say definitively whether they have heard Avici is in or out at AT&T.
Cisco hiring of former Avici Systems Inc. and Polaris Networks CEO Surya Panditi. When they want all the biz with SBC / ATT it's no problem now.
There was alot of BS moonshine around AVCI from day one. Warrants, etc. At least they got the IPO off, got business, and survived for alot longer than others. Much more than you can say for Procket and the other Buffoons.
I agree with your stance on the multi-vendor benefit in principle. It is not in AT&T's best interest to have too few suppliers. However, in order for the multiple vendor story to work, they have to be a competitive threat to one another. Avici has neither the product breadth nor the market penetration to really allow AT&T to pit them against other suppliers. They are seen as a dead man walking. Their contract was extended only to keep status quo and delay the decision for a replacement in the core.
As for thier financials, I have to disagree. While the ratios you mention look good when analyzed with no context, when put into market perspective, they tell a much different story. Yes, they have some cash left. Yes, its enough for them to die a slow and painful death. But, No, it would not be in anyone's best interest to buy them out. Their technology is antiquated and represents zero innovation over what is currently available from other major suppliers. Their footprint and market penetration is negligible. What would be the driver for acquisition? They are not a threat to any of the major players. Why not just wait them out?
Even the most competent management team cannot fix this.
No big surprise here, SBC/AT&T is a Cisco's house. They're currently testing the CRS-1 to run parallel with Avici. The Avici's routers would still be there but the SBC will stop buying from Avici.
You heard it here first, AVICI is a dead man walking
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