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AFC Hits Profits, Drops Hints

As expected, Advanced Fibre Communications Inc. (AFC) (Nasdaq: AFCI) AFC chairman and CEO John Schofield wouldn't outright confirm that his company is set to begin fiber-to-the-premise (FTTP) trials with RBOCs as part of a big request for proposal (RFP), but he was fine with making oblique references to it during the company's third-quarter conference call (see AFC Reports Q3).

In one strange instance, Schofield said he wished listeners could "hear the smile in my voice."

The hint-dropping continued as chief financial officer Keith Pratt noted that AFC expects to begin "lab trial activity" with its FTTP product – the timing of which lines up with what SBC, Verizon, and BellSouth have said regarding their plans to start testing products (see Carriers Give FTTP Update and Speculations Boost AFC).

All the same, Schofield cautioned that AFC won't expect to see FTTP revenues this year. "It's not clear exactly how much, and when, and where the carriers will roll out FTTP," said Schofield during the question-and-answer portion of the call.

For a diversified access company like AFC, the interest in FTTP has stolen some of the thunder from its DSL products. AFC's brass note that the company's big, 300-DSLAM order from two RBOCs hasn't ramped as quickly as first anticipated, and those orders will be pushed out into 2004.

As it did last quarter, AFC posted a quarterly profit, but the company's revenues fell from a year ago (see AFC Profits in Odd Times). AFC reported earnings of $9.3 million, or 11 cents a share, on revenues of $85.2 million for the third quarter of 2003, which ended September 30. A year ago, the company earned 11 cents a share on $91.8 million in revenues. Analysts surveyed by Reuters had expected AFC to earn 10 cents a share on $84.9 million in revenues.

Alltel Corp. and Sprint Corp. (NYSE: FON) each accounted for more than 10 percent of AFC's third-quarter business. AFC's two big customers together accounted for more than half of its revenues during the quarter, Pratt says.

The company ended the quarter with more than $1 billion in cash and investments, and its headcount held steady at 755. AFC's days sales outstanding during the quarter was 66, compared to 46 during the year-ago quarter, meaning that it took AFC about 20 days longer in 3Q03 to collect outstanding receivables than it did a year ago.

In the meantime, the company isn't forecasting much growth. Next quarter, it expects revenues to be in the range of $83 million to $85 million.

AFC shares were being hit in after-hours trading, changing hands at $24.29, down $2.06 (7.82%) from Tuesday's close of $26.35.

— Phil Harvey, Senior Editor, Light Reading

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