Earnings reports

Avici Down, Redback Less Down

2:50 PM -- Catching up on the Jetsons treadmill that is earnings season...

Avici Systems Inc. (Nasdaq: AVCI; Frankfurt: BVC7) got clobbered yesterday, down $1.28 (15.1%) to $7.21 after putting some cold water onto what had been an up quarter, with revenues of $20.2 million. (See Avici Posts Q3.)

Avici is sticking to a prediction of $75 million to $85 million in 2006 revenues -- meaning the fourth quarter will drop down to as little as $8 million.

At least they're being honest. Avici knows 2006 has been an anomaly, and that the sales it's been seeing -- including a big surprise in the second quarter -- can't be sustained. "Shareholders should not necessarily expect that 2006 financial performance to date will be indicative of future performance," CEO William Leighton said early in yesterday's conference call. (See Avici Rocks 42% on Shock Profit.)

Specifically, AT&T Inc. (NYSE: T) -- Avici's biggest customer by far -- can't be counted on for the same level of sales, in part because Avici expects other vendors to get used in AT&T's core. "I don't think it would be prudent to assume otherwise," Leighton said, without mentioning Cisco Systems Inc. (Nasdaq: CSCO) specifically.

Redback Networks Inc. shares had a post-earnings slip, too, but not as dramatic. (Shares were down 5 percent this morning and have crossed into "up" territory by this writing.)

The company met analyst expectations with third-quarter revenues of $70.9 million and a fourth-quarter forecast of $78 million, and non-GAAP net income of 12 cents a share beat the 10-cent consensus tallied by Reuters Research .

But Redback's third-quarter book-to-bill was less than 1, a sign that sales (and therefore future revenues) weakened. During the quarter, BellSouth Corp. (NYSE: BLS) dropped off the list of customers representing 10 percent of revenues; Redback compensated with a burst of sales from its older SMS products, accounting for 35 percent of third-quarter sales, versus 21 percent for the second quarter.

"Redback must have stretched to fill in a sizable Q/Q hole in the Q3 revenue stream created by BellSouth," writes analyst George Notter of Jefferies & Co. Inc. in his morning report.

Redback does expect BellSouth to bounce back in the fourth quarter, and analysts seem to believe them. But after the good year Redback has seen, it's not surprising to see hiccups. Redback almost hinted as much last quarter. (See Redback in Guidance Guessing Game .)

— Craig Matsumoto, Senior Editor, Light Reading

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