Corvis Closing in on New Customers
Several sources close to the company have confirmed that the optical networking startup is expected to announce at least two more telecom carrier customers as early as the next few weeks. The names, however, are still being kept under wraps.
Recent product additions designed to enlarge the customer base may soon have that desired effect (see Corvis Eliminates EDFAs and Corvis Offers 3.2-Tbit /s Transport System). For example, the CorWave LR, a DWDM (dense wavelength-division multiplexing) transmission product announced last week, is expected to expand Corvis's market into Europe. The product was derived from technology Corvis acquired when it bought Algety early last year. Algety was orginally spun out of France Telecom SA as a play for European networking markets.
"They're going to be announcing some customers soon," says Chris Nicoll, vice president with Current Analysis. "We'll see what the details are."
New customers would give Corvis -- and its investors -- a needed boost. Since going public in the summer of 2000, the company hasn't announced any additional customers (see Customer Questions Dog Corvis). In addition, all of its existing customers, which include Williams Communications Group (NYSE: WCG), Qwest Communications International Corp. (NYSE: Q), and Broadwing Communications (NYSE: BRW), were given pre-IPO shares or warrants to invest in the company. So far, Corvis has only recognized revenue from sales of its CorWave switching and transport products to Broadwing.
Corvis VP of engineering Dave Smith, interviewed at an investor conference at last week's Optical Fiber Conference, said that the CorWave LR is designed specifically for European carriers and that he expected the company to find European customers for the products, though he wouldn't comment on specifics. The CorWave LR has a shorter reach but a larger switching capacity, making it a better fit for Europe's shorter reach, higher density networks, said Smith.
Smith, also said the CorWave LR product was part of the deal with Qwest, an announced Corvis customer that hasn't yet bought any products.
"Estimates right now include three customers, so announcing two new customers would be incremental to our estimates," says Jim Jungjohann, analyst with CIBC World Markets. "We're quite comfortable with the full year, but we see some concern about revenue recognition in the June quarter."
Jungjohann said he rates the stock as a Buy and thinks the shares are reasonable at their current level (Corvis was recently trading at about $8). He noted that Corvis is sitting on $3.50 per share in cash.
Corvis officals had not returned requests for comment by press time.
-- R. Scott Raynovich, Executive Editor, Light Reading http://www.lightreading.com