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Mergers & acquisitions

Corvis Loses Sales VP; Gains President

Corvis Corp. (Nasdaq: CORV) is shaking things up at the top.

Today, the company confirmed that Rick Bakosh, senior vice president for worldwide sales since August 2000, is no longer at the company. It also announced that it has completed the acquisition of Dorsal Networks and that James Bannantine, Dorsal's former CEO and president, will take over the role of president of Corvis.

While Bakosh is still listed on the company’s Website, and the company operator is still forwarding calls to his voice mail, he officially stepped down from his position about two weeks ago, says Keira Sheine, a company spokesperson. Sheine also says that Bakosh left on good terms and that both sides agreed that he should leave the company.

Bakosh’s departure and the completion of the merger come as Corvis struggles to reposition its strategy and win new business. On its last quarterly earnings call, the company reported only $8.7 million in sales under contracts with Broadwing Inc. (NYSE: BRW), Williams Communications Group, and Telefònica of Spain (see Corvis Reports Q1 Results). Pro forma net loss for the quarter was $41.3 million, or $0.11 loss per share, excluding restructuring and other charges, intangible asset amortization, and equity-based expenses.

For several months, the company has suffered one setback after another. The largest blow came when a deal with Qwest Communications International Inc. (NYSE: Q) was reduced from $150 million to $12 million (see Corvis's Qwest Deal Reduced by $138M). It also experienced a disappointing setback as WorldCom Inc. (Nasdaq: WCOM), a carrier it has hotly pursued for several months, announced further cuts in spending (see WorldCom to Cut Capex?). The company has started winning some small deals, such as the one with France Telecom SA to supply its festoon product (see France Telecom Picks Corvis). But more wins and bigger wins are certainly still needed.

Rumors have been circulating for about month that Bakosh, a former vice president of sales at Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA), was on his way out. Some people have speculated that Bakosh’s departure will be the first in a long line of shakeups at the company. But others say that Bakosh is merely the fall guy for a company that is suffering from one of the worst industry downturns in history.

“The biggest challenges for this company are things that are out of their control,” says Simon Leopold, an analyst with Merrill Lynch & Co. Inc. “They are trying to reposition themselves in a market that is imploding. Do you blame the head of sales at any company for a market transformation? I think that’s a bit of a stretch.”

Corvis is actively searching for a replacement, but there is no official word yet on who will replace Bakosh. For now, the rest of the sales team remains intact.

Bannantine, who previously served as CEO of Enron South America until January 2001, succeeds Dr. David Huber as president. Huber, who also founded Corvis and is the company’s largest individual shareholder, will remain chairman and CEO of the company. Bannantine joined Dorsal Networks as CEO in September 2001.

The Dorsal acquisition angered many shareholders, who said that Corvis was paying too much for a company without revenue (see Corvis Dorsal Deal: A Huber Spin-In?). The value of that deal has fallen by almost half since it was first announced in January. Based on today’s price of $1.17 per share, the value of the deal is only about $46.8 million, versus $2.18 per share or $87 million when Corvis announced it was buying Dorsal on January 29th.

— Marguerite Reardon, Senior Editor, Light Reading
http://www.lightreading.com
photons-r-us 12/4/2012 | 10:23:08 PM
re: Corvis Loses Sales VP; Gains President What is Corvis doing about Terry Unter ? Rumours were circulating at OFC that he bumped into the Doctors ego and things blew up. Any dissenting opinions or independent thinkers will systematically be weeded out of Corvis.
photons-r-us 12/4/2012 | 10:23:07 PM
re: Corvis Loses Sales VP; Gains President Right, dispensing the cash would be the best way to boost the share price ! Corvis has about $1.82 per share in cash, and more when you count assests.

Wall St. has been very clear, they are going to consitently value Corvis at some fraction of cash. The fraction is essentially constant and hence the stock will ride the cash balance down and down and down...... A slow and agonizing death spiral.

Unfortunately alot of us care, because we are left holding shares of this turkey !
dietaryfiber 12/4/2012 | 10:23:07 PM
re: Corvis Loses Sales VP; Gains President
Actually given that they have approximately 3.5x R&D spend than they have in Revenue, I am unclear on why anyone would write about them. It seems to me the best thing that the company could do is give the cash back to the shareholders now, before its all gone.

dietary fiber
Lightwoman 12/4/2012 | 10:23:03 PM
re: Corvis Loses Sales VP; Gains President All I can say, as a corvis shareholder, is that when Bakosh came on there were three main customers, qwest, bw, and williams. And those are still the main customers today, years later (the $1m FT festoon does not count!). Not a lot to show for a vp of sales. As a shareholder, I want someone who will get results.
Sparxe 12/4/2012 | 10:23:02 PM
re: Corvis Loses Sales VP; Gains President All I can say, as a corvis shareholder, is that when Bakosh came on there were three main customers, qwest, bw, and williams. And those are still the main customers today, years later (the $1m FT festoon does not count!). Not a lot to show for a vp of sales. As a shareholder, I want someone who will get results.

Mark this on your calendar LW.

I agree with you 110% We can't fire the whole team so the manager has got to go. We all want results.

Sparxe Nj
dietaryfiber 12/4/2012 | 10:23:02 PM
re: Corvis Loses Sales VP; Gains President Photons,

Better sell now. They are continuing to eat cash and thats not going to help the share price.

dietary fiber
corviskid 12/4/2012 | 10:23:00 PM
re: Corvis Loses Sales VP; Gains President >Wall St. has been very clear, they are going to consitently value Corvis at some fraction of cash.

9/2 is a fraction. Might happen in the next 12 months.
surveyor 12/4/2012 | 10:22:56 PM
re: Corvis Loses Sales VP; Gains President "...revenues results are in - and they are absolutely dismal. It is time to whip the slaves. The board and the venture capitalist start in on the founders and the president, who in turn put the screws to the vice president of sales, who passes it on to the troops in the trenches. Turnover follows." Geoffrey Moore, "Crossing the Chasm"

It is an old story. It is a shallow well for shareholders to think that this VP sales controls the destiny of product market penetration. You would do well to dig deeper.
zweisel 12/4/2012 | 10:22:56 PM
re: Corvis Loses Sales VP; Gains President Hi dave77777,

please put another positive spin on this new nail in the Corvis coffin please? Thanks.
purna 12/4/2012 | 10:22:39 PM
re: Corvis Loses Sales VP; Gains President Corvis has indeed a high burn rate in terms of Sales VPs. Bakosh is the third top sales executive to leave Corvis. The second tier of sales executives in the US and Europe has also known significant churn. Although the market downturn is largely responsible for the collapse in sales at Corvis, its lack of pragmatism and its arrogance, including within the sales organization, deserves a large share of the blame. After several quarters of dramatic revenue decreases, it is normal that Bakosh had to go.

This being said, sales cycles are quite long (and increasing) in the long haul optical networking market. Commercial success also depends on a company's ability to build long term relationships with its customers, including at personal level. The turmoil in the sales organization is not going to help the company in winning business. I hope that Bannantine will help Huber to understand this. If Corvis does not succeed in winning market share during the next quarters, I do not see any reason for it to stay in business. It better returned the money to its shareholders.
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