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Corvis Stock Slips on Q3 Report

Light Reading
News Analysis
Light Reading
10/25/2001

Optical switch and transport equipment maker Corvis Corp. (Nasdaq: CORV) hit the low end of expectations in announcing poor third-quarter earnings, sending its stock into an after-hours slide.

After the market closed tonight, the company reported revenues of $24.2 million for the third quarter. This is down considerably from its second-quarter revenues of $65.0 million and its first-quarter revenues of $84.1 million.

Even though analysts had lowered their expectations, the news still sent Corvis’s stock down $0.30 (14.85%) to $2.02 in after-hours trading on the Island ECN.

Pro forma net loss for the quarter was $40.3 million, or $0.11 loss per share, excluding goodwill and other intangible assets, amortization expense, and equity-based expense, compared with a pro forma net loss of $32.2 million, or $0.09 per share, for the previous quarter and a pro forma net loss of $23.9 million, or $0.07 per share, for the third quarter of 2000.

Reported net loss was $80.6 million, or $0.23 per share, for the current quarter, as opposed to a reported net loss of $821.8 million, or $2.36 per share, for the second quarter, and $66.4 million, or $0.29, for the year-ago quarter.

Analysts had expected lowered revenues and adjusted their guidance. Rick Schafer, an analyst with CIBC World Markets sent out a research note on Oct. 17 reducing his revenue expectations to $25 million from his previous stated expectations of $50 million.

The company was able to reduce its cash burn rate by 46 percent to $57 million from $106 million the previous quarter. Anne Stuart, the CFO, said the company would reduce it even further in the next quarter. Most of the reductions came from previously announced layoffs and also some cuts in research and development costs. The balance sheet reported $715 million in cash and cash equivalents left at the end of the quarter.

For the fourth quarter the company expects revenues between $15 million and $35 million. The company wouldn’t give guidance for 2002 but reiterated that it would continue to reduce operating expenses and cash burn rates.

Corvis only recognized revenue from two customers this quarter. Broadwing Communications Inc. (NYSE: BRW) generated about 70 percent of the revenue while Williams Communications Group (NYSE: WCG) accounted for 30 percent. Qwest Communications International Corp. (NYSE: Q), which had sent in a large purchase order in midyear, did not generate any revenue. The carrier is completing testing of the Corvis gear and isn’t expected to certify it until late in the fourth quarter or even the first quarter of 2002.

“It is definitely not a positive to have revenue pushed out like this,” says Schafer. “But we are relatively confident that Qwest will sign on for the equipment. A lot of carriers are taking a longer time to evaluate products, and Qwest is just on the longer end.”

The company has four other customers that should also start generating revenue in the next year, Telefònica, France Telecom SA, EPIK Communications Inc., and a fourth unannounced carrier.

— Marguerite Reardon, Senior Editor, Light Reading
http://www.lightreading.com

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Belzebutt
Belzebutt
12/4/2012 | 7:40:25 PM
re: Corvis Stock Slips on Q3 Report
In light of these results, I think it's time to ask. Is the CORV equipment really cutting edge like the CORV message board claims? Is it possible that a company which is supposedly so far ahead that it's in its own market, can be the worst performer? Have they been pulling wool over people's eyes? Surely if Broadwing was THAT extatic over the equipment other companies would see that too. Something's up...
poster
poster
12/4/2012 | 7:40:24 PM
re: Corvis Stock Slips on Q3 Report
yes, I would say that based on these results, corvis is a house of cards waiting to fall. no guidance for '02 means no gaurantees. people are still building networks, albeit a little slower in the recent months, but corvis has only managed to scrap together 2 paying customers during it's entire existence? that tells me somethings wrong. forget about all the CLECs started in the last 2 years, there should be some business just out of the umpteen incumbents. not ONE of them is willing to upgrade a network with corvis gear? that spells trouble.


iprsvp
iprsvp
12/4/2012 | 7:40:18 PM
re: Corvis Stock Slips on Q3 Report
Let's look @their customers!

Q -- They are going get revenue ONLY
after ceritfication. And certification is going
on forever and there is no gaurantee that @the
end of the day they will end up with a good deal.

WCG -- Willams itself is a house of cards. So
I am not really how much revenue corvis generate
from WCG.

FT -- I hearing about this customer from my last
life and still they can't get anything out of
it. I don't really understand CORV just bcos
they announce field trial and lab trials. If look
at this way EVERY optical company can announce
a field/Lab trial.

I really don't think there products are that good
as they cliam. If they were why would Q would
take sooooooooooo long to say one YES. That means
Q has some other sources may be CIEN or NT. As
all of us already know CIEN rocks @Q. So watch out guys.




ray_of_light
ray_of_light
12/4/2012 | 7:40:09 PM
re: Corvis Stock Slips on Q3 Report
They have a great idea and concept but Carriers are just not seeing the demand for it right now. They are not seeing the benefits of changing their infrastructure and network topology to support the system. I think it's a great system for Greenfield Carriers who want a clean and efficient solution out of the box but how many nationwide Greenfield carriers are there - not many. Also I think Carriers may be waiting on other Carriers to make the move. It will be interesting to see if anything comes out of these trials - might start a bit of a snowball effect.
Sparxe
Sparxe
12/4/2012 | 7:40:04 PM
re: Corvis Stock Slips on Q3 Report
In the collective haste to beat the shit out of Corv; take a minute to look things over. All the news from the earnings call, was already taken out of the stock long ago. Maybe the analysts don't get it. I agree the $20 mil income is a sickass number. However, they clearly state they have little debt, and have $713 mil in cash... On the news, the stock barely is down six percent! In addition its gained 20+ percent in the last month.

Hellooooo... They are losing $60 mil a quarter and its declining... at that rate CORV has enough money to stay at the table for OVER TWO more YEARS. How many companies can do that? THATs without ONE customer. Does anyone want to wager they can't sell a major project for the next two years.

In Techland there is not a better investment to be found. In this Security and Connection crazy new world ... CORV is money in the bank...

At the stinkin $3.50 CSFB is targeting ..you still gain 30+% .... give me a better stock at that level and I will buy it.. if not ...clam up

CORVs good for $9.50 late spring..

Sparxe Nj
gea
gea
12/4/2012 | 7:40:02 PM
re: Corvis Stock Slips on Q3 Report
I kind of agree with Sparxe, but...
Look--Corvis isn't the be-all and end-all that they have tried to claim. Their technology is not super radical or new, and you really do need to deploy Corvis end-to-end for it to make sense. And then, of course, there are going to be some operational issues in terms of wavelength blocking.
That said, Corivs is one of the few companies I know that have thought fairly carefully about what they want to achieve, and about how to accomplish this technologically. It is a self-consistent story that pushes certain optical issues to the forefront and solves them. That's a hell of a lot more than most other companies can claim.
Me? I'm selling tellabs NOW and gonna buy a buttload of corvis, and then forget about it for a year or so. After that, I'll either have nothing or I'll be buying a summer house with the money. Chances of success? 1 in 100. Payoff? 200:1. An excellent, high-risk bet.
Belzebutt
Belzebutt
12/4/2012 | 7:40:02 PM
re: Corvis Stock Slips on Q3 Report
On the news, the stock barely is down six percent! In addition its gained 20+ percent in the last month.

So you're saying "CORV is up"? I wish I had your optimism, come to think of it my stocks are also up from their all time lows...

Whatever you're having, pass it around, we all need some.
LightBeating
LightBeating
12/4/2012 | 7:39:57 PM
re: Corvis Stock Slips on Q3 Report
Irsvp,

Let's take another look:

Q: was never expected to generate revenues before Q4-01 (re-listen to previous conference calls). Still, they have a $150M commitment, conditional on product certification.

WCG: had a $200M contract. This has not been renegotiated, as has been stated clearly during the conference call. So mainly, purchase orders have been pushed out. Nothing unusual this year...but it still means that Corvis can expect at least another $100M or so of revenues from WCG in the next year or so.

Mystery customer: I voted for Sprint on the Motley Fool board. It's either them or AT&T, but I know that Huber has had good relationship with Sprint from the Ciena days. We don't know how much revenue this will generate, but it's something above zero!

FT, Telefonica: strong foothold in Europe, what's bad about that?!

Epik: it will be good that they have someone to test their new switch.

Of course, I was disappointed by the $24M, but it's clearly the customers slowing down on capex, and this has been happening for the past 9 months to all other system suppliers. So far, Corvis has not LOST a single customer, and managed to get a few more. In the current environment, this is not a bad accomplishment.

Sure business will suck for another 2, maybe 3 quarters. Are Nortel, Lucent, and Ciena better off? Cash burn seems a lot better at Corvis, actually.

LB
HarveyMudd
HarveyMudd
12/4/2012 | 7:39:50 PM
re: Corvis Stock Slips on Q3 Report
A close examination of Corvis would reveal that it has nothing new or outstanding technology.

Its disappoing revenues clearly indicate the future of the company. Its total valuation at this time should be no more than $100.00 million dollars or so.
MKTG_Hack
MKTG_Hack
12/4/2012 | 7:39:50 PM
re: Corvis Stock Slips on Q3 Report
Gee, Mr. Mudd, you're always such a little ray of sunshine.
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