Corvis Stock Slips on Q3 Report
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