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AFC Fesses Up, Defenders Pipe Up

Light Reading
News Analysis
Light Reading
3/12/2004
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Ready for the daily update on Advanced Fibre Communications Inc. (AFC) (Nasdaq: AFCI)?

The company now admits it missed a product delivery deadline related to its fiber-to-the-premises contract with Verizon Communications Inc. (NYSE: VZ), costing it about $2 million in revenues. But Wall Street analysts seem split as to whether the gaffe is enough to upset Verizon’s deployment goal or AFC’s status as the carrier’s sole FTTP gear supplier.

In an SEC filing today, AFC said it missed a February 23 product delivery, costing it a PCP (performance compensation payment) of $2 million. “We subsequently provided the required product release on March 8, 2004,” the filing states.

Investors welcomed the explanation, as AFC shares climbed back up $1.74 (7.90%) to $23.76 in late afternoon trading on Friday. AFC shares were still down 7 percent for the week, despite Friday’s gains.

“The important takeaway here, in our view, is a clarification of this process should help address recent speculation that AFC has experienced tech issues with Verizon,” writes Lehman Brothers analyst Steve Levy, in a note sent to clients Friday.

On Tuesday, Pacific Growth Equities Inc. analyst Joe Noel reported that AFC was having technical trouble at Verizon. He reported the difficulties, a problem with AFC’s software, was causing dissension in the Verizon ranks and had moved the carrier to ask Alcatel SA (NYSE: ALA; Paris: CGEP:PA) to update and reissue its bid for the FTTP contract.

UBS Investment Research analyst Nikos Theodosopoulos wrote earlier this week that Verizon would likely miss its stated goal of passing 1 million homes with fiber in 2004. Verizon's initial FTTP deployment plans involve passing about 1 million homes with fiber this year and potentially doubling the deployment pace in 2005 (see How Big Is FTTP for AFC? and More Trouble for AFC ).

Smith Barney analyst Alex Henderson calls AFC’s product deadline slip “inconsequential,” in a note to clients today. “There have been some statements by our competitors that Verizon may have recently lowered its internal target for FTTP homes passed in 2004. However, we do not believe this to be the case and think that 1 million homes continues to be the target,” he writes.

Earlier this week, Noel also commented on AFC’s M&A activity and floated the rumor that CEO John Schofield is close to stepping down, two topics his fellow analysts haven’t addressed (see AFC/Verizon Glitch Alleged).

In January, Light Reading reported that Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA), an early AFC investor, was trying to hammer out a deal to buy the company (see Tellabs Angling for Access – and AFC). The two sides walked away amicably, but others may be lurking, according to some sources. As one source close to AFC says, “Tellabs isn’t the only company that knows AFC well.”

— Phil Harvey, News Editor, Light Reading

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Big Red
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Big Red,
User Rank: Light Beer
12/5/2012 | 2:15:40 AM
re: AFC Fesses Up, Defenders Pipe Up
Didn't AFC state there was nothing wrong two days ago ? And now they admit they missed another delivery date only to make it seem OK by paying a hefty fine ? Anyone care to guess as to the quality of product delivered ? Anyone care to guess what the next excuse will be in a month ?
ecipo
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ecipo,
User Rank: Light Beer
12/5/2012 | 2:15:39 AM
re: AFC Fesses Up, Defenders Pipe Up
"Didn't AFC state there was nothing wrong two days ago ?"
As far as i can recall they said nothing like that.
Road Trip
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Road Trip,
User Rank: Light Beer
12/5/2012 | 2:15:39 AM
re: AFC Fesses Up, Defenders Pipe Up
Yes - Yes - Bad - Locusts

---------

Didn't AFC state there was nothing wrong two days ago ? And now they admit they missed another delivery date only to make it seem OK by paying a hefty fine ? Anyone care to guess as to the quality of product delivered ? Anyone care to guess what the next excuse will be in a month ?
ecipo
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ecipo,
User Rank: Light Beer
12/5/2012 | 2:15:22 AM
re: AFC Fesses Up, Defenders Pipe Up
and what's the feelin at ROLOSTAR.Com about AFC, is this as bad as Pacific Growth said?????????
OSPGuy
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OSPGuy,
User Rank: Light Beer
12/5/2012 | 2:15:22 AM
re: AFC Fesses Up, Defenders Pipe Up
""BTW, I found better information directly from customers, partners,.... of AFC quite anonymously on ROLOSTAR.Com. RoloStar is becoming quite a portal for telecom folks.""


I met my wife on ROLOSTAR.com.
truelight
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truelight,
User Rank: Light Beer
12/5/2012 | 2:15:20 AM
re: AFC Fesses Up, Defenders Pipe Up
AFC has always had problems when dealing with RBOCS and investorn cusotmer commitments. The CEO has contiunally promised over the last 5 years he would secure an RBOC. Expect to hear of continued software problems with Verizon. That's why JS the CEO is shopping the copmpany to sell the company and move on (he has been trying to get the right price for five years ! ).

BTW There is NO common software across the product line. Now with a IAD(GVN), DSLAM (Acceslan), DLC (UMC1000) and another DLC(Reltec) that's three software lines to manage - good for the software employment tho.







mrdid13
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mrdid13,
User Rank: Light Beer
12/5/2012 | 2:15:04 AM
re: AFC Fesses Up, Defenders Pipe Up
AFC has made some short sighted decisions over the past three or four years from a product perspective. Instead of really looking at their core markets and perhaps hiring some good engineering talent to fix those ever-present bugs, they have opted out of delivering key services like ADSL2plus and yes, they have all but abandoned their video over copper initiative which was such a big deal the past year and a half. Instead, all the eggs went into the FTTP basket and the future of the company hinges on their performance. Too, the acquisition of the Marconi product only goes to fill the revenue gap expected from the falloff of their sales to the independents. Calix and Occam are poised to swap the goodies out of their lunchbox. Did anyone asked about the status of their OC-48? JS is a great personality but the political issues behind him has one questioning who really is in control?
wap545
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wap545,
User Rank: Light Beer
12/5/2012 | 2:15:00 AM
re: AFC Fesses Up, Defenders Pipe Up
No they (AFC) haven't fessed up, their product is Vaporware and Verizon cannot admit they got caught in this mess so they are stuck. OUR Industry Analysts also continue to feed us the propaganda these folks put out.
Why doesn't some brave Analyst do a real investigation into this and publish the real story. They can send thats tory to both parties and get them to comment on details and then they can publish.
If Light Reading is going to continue to write these pieces on AFC put something other than Analysts opinions in them
technonerd
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technonerd,
User Rank: Light Beer
12/5/2012 | 2:14:59 AM
re: AFC Fesses Up, Defenders Pipe Up
Why doesn't some brave Analyst do a real investigation into this and publish the real story.
That's not what analysts are for. Individual "investors," i.e., speculators, have flocked to the Internet traders where the commissions are rock bottom. So their dollars aren't paying the analysts. The big institutions pay 5 cents a share, and they don't want the "real investigation," they just want the analyst's first phone call.

The real money is paid by the issuers of securities. Why on earth would an analyst issue an investigation when the people who finance his existence are those who want him to promote stocks?

Bottom line is that if people want the analysts to be "brave" then they have to pay for bravery. It's Wall Street, baby. You get what you pay for.
truelight
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truelight,
User Rank: Light Beer
12/5/2012 | 2:14:55 AM
re: AFC Fesses Up, Defenders Pipe Up
Enough said about AFC.

As for Calix: Everyone in the valley knows this is a "expensive product". It costs 50% more to build than what it actually sells for! Never build an expensive ASIC to deal with only POTS market in rural America.

Over-engineered, over-promised and underperformed company and product. Perhaps the ex-cerent squads' prior success was timing and luck verus their management skills.


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