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What Calix Won't Do With $100M

As Recovery Act applications are being approved, Calix Inc. (NYSE: CALX) announced today that it is getting ready for action as Tier 2 and Tier 3 service providers look to expand their broadband networks.

The Petaluma, Calif.-based access equipment vendor said:



And with all that activity going on, don't expect the firm to go all Hatteras Networks Inc. on us. (See Carrier Ethernet Equipment Is Very Much Exciting These Days.)

Calix, which brought in $250 million in revenues in 2008, insists that this huge funding event is business as usual.

"We've got huge opportunities in front of us in access infrastructure and lots of work that we can do in the access infrastructure to help our customers be successful, and that's what we're going to do," says Carl Russo, Calix's CEO. "We don't have any plans to hire a hundred people to go do something -- that would just be out of our nature."

A bit later in a conversation with Light Reading on Friday, Russo noted: "We haven't changed in our strategy. There's nothing about this that you should read into it that they're getting a war chest together to go acquire or do a particular thing."

Know what else Calix isn't going to do? It isn't looking to take on huge outsourcing projects from its customers in the same way that the larger telecom equipment vendors have done. "Our goal is not to outsource people from our customers," Russo says. "Our goal is to figure out how to remove work from the process, not by removing it and moving it to Calix, but by drastically simplifying the operations of their networks."

— Phil Harvey, Editor-in-Chief, Light Reading

jmunn 12/5/2012 | 3:57:31 PM
re: What Calix Won't Do With $100M

Smells like bonus season at Calix!!


$100M added to the balance sheet must trigger some serious bonuses for at least some people at the top.


If they are not hiring, not acquiring and they are not taking on the Carrier's work then they must be about to do a new development with the current personnel and they believe that they need $100M to get it started?


It must be some good story they told the VC guys to get them on board.


Nobody has leaked the "Story"??


I wish my company could get $100M up front to start a new development with the current staff.


jmunn


 


 

DCITDave 12/5/2012 | 3:57:31 PM
re: What Calix Won't Do With $100M

Yes, maybe the whole funding thing is just a ploy to pay themselves more.


Who do you think these guys are, the U.S. Senate?


ph

paolo.franzoi 12/5/2012 | 3:57:29 PM
re: What Calix Won't Do With $100M

 


Okay, the $100M is really $50M and $50M.


The $50M of loan would be poorly used if it is used to fund day to day operations.  If it were me, I would be having a nice little bankroll because RUS like contracts have some interesting payment clauses.  It might be nice to have a cushion to build product without drawing down on my last cash reserves.


The other $50M should be troubling.  There is a LOT of money into Calix.  I haven't added it all up, but it might be somewhere over $400M.  At this point, one would hope that the company wouldn't need more money to keep the doors open.  But if you read the messaging, that is what I read.  If they were cash flow positive, the load would have been useful.  But here they are diluting things again.  With no definite plans for the money, but you don't get money for no reason at all.


I would say the stimulus is really a problem for Calix and Occam.  We should be able to track the progress through Occam, as they are public and focused on markets where there should be spending based on stimulus.  The problem goes something like this:  Is there a big uptick?  If so, then what happens when the stimulus goes away (have people pre-bought gear that they were eventually going to buy anyway)?  If not, where did it all go?


seven


 

OSXman 12/5/2012 | 3:57:29 PM
re: What Calix Won't Do With $100M

I think Calix is going to use the broadband stimulus as a hook by which to go public.  This funding round, I bet, is nothing more than a late mezzanine funding round to dress up the balance sheet and give them a little bit more capital to build working capital balances.  RUS can be capital intensive.   The VCs will be getting this money back, and more, within the next nine months.


My guess is that if Calix is profitable it is not by much.  Their cash balances are probably low and, with the almost certainty of a pickup in business, it presented an opportunity to raise funds. 


 

paolo.franzoi 12/5/2012 | 3:56:59 PM
re: What Calix Won't Do With $100M

 


Occam has little debt, little cash and is losing money.


What company are you looking at?


 


seven


 

Tesla_x 12/5/2012 | 3:56:59 PM
re: What Calix Won't Do With $100M

Mr. 7,


"I would say the stimulus is really a problem for Calix and Occam."


I would not even compare the 2 in this context.


OCNW has virtually ZERO debt, whereas Calix?


As you said: "If they were cash flow positive, the load would have been useful..."


Well, I think we can agree that OCNW is pretty darned close to cash flow positive/eps+, so borrowing or expanding a credit line is good for them


Calix?  More a sign of posturing or other financial issues, IMHO.


Monies like this are key to being able to digest a good chunk of the stimulus(enhanced working capital/credit line)...not something to be squandered on propping up a balance sheet.


OCNW should be fine, and is well poised to borrow bigtime as needed to expand. 


Other Debt ridden competitors?


Not so much.


 

paolo.franzoi 12/5/2012 | 3:56:58 PM
re: What Calix Won't Do With $100M

 


The stimulus will be based around GPON in the Tier 3s.  That is about a 0% market share for Occam.  The Tier 2s are not doing stimulus.


Note - Losing Cash aka Cash Flow Negative is not a sustainable business model.  It is quite possible to be negative EPS and Cash Flow positive.  Being Cash Flow Negative means that you will have to raise more money.  Calix did it, Occam will have to as well as they have several times in the past.


Occam is a cute little company with nowhere to go.


seven


 

Tesla_x 12/5/2012 | 3:56:58 PM
re: What Calix Won't Do With $100M

OCNW:


The one with ~$43M cash (just a little...right?), $32K debt (agree), and 20% Tier 3/2 marketshare...


losing money?  So is Calix, right? 


Why else would they need to gorge themselves at a trough of $100M?


-cuz they're doing so *well*?


 


Many companies are cash flow neutral to slightly negative today, I think OCNW, though, has one of the best positions leading into the Stim, and the financial flexibility to get the most from it, and one of the lowest sharecounts so that any success can be lucratively shared with it's shareholder base.


 


 


 

Tesla_x 12/5/2012 | 3:56:56 PM
re: What Calix Won't Do With $100M

Mr. Seven,


I find your view of GPON Tier 3 marketshare lacking...


Nonetheless, we shall see how things play out...and who has the facts straight.


 


 


 


 


 


 

rbkoontz 12/5/2012 | 3:56:51 PM
re: What Calix Won't Do With $100M

What will they do with it?


mr CEO is finally do a pay day.  If the public markets won't ring the register for him, then private money will have to satisfy the ego.

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