Earnings reports

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
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cfaller 12/4/2012 | 7:38:28 PM
re: Corvis Stock Slips on Q3 Report So, in closing, you don't see CORV stock going to the $20s, but rather at maybe, possibly, if everything goes right (analyst upgrades, record turnaround from recession, huge turnaround in telecom capex spending), a chance at $10? That's half your original projection. You must be a Wall Street analyst with that kind of double talk.

As for my P/E assignment of 20 to CORV, perhaps I was being generous, but even at that high a P/E CORV still doesn't make its numbers...
gea 12/4/2012 | 7:38:26 PM
re: Corvis Stock Slips on Q3 Report Although I don't believe Corvis will start selling $200 million worth of gear in the next year or two, I wouldn't rule it out. Corvis pretty much dominates a niche that may or may not be important one day. I think that niche probably won't be extremely important, but in the off chance I am wrong, then Corvis will dominate Long Haul carrier's networks. In other words, two years from now, Corvis will either be just about out of business, or they'll be the next Ciena.

As for the previous comment on Juniper, it dopesn't really make a lot of sense. Junpier is a terabit router company exclusively right now. A carrier deploying Juniper will still have to deploy optical transport gear. The only philosophical battle between the optical world and the bigass router folks is concerning the role that optical cross connects might play in a network dominated by OC-48/192 POS pipes (ie, between routers). Some of the router folks seem to believe that the cost per bit of routing will continue to be cheap enough so as to obviate the need for OXCs, except in special niche environments. But you still need transport/DWDM gear to move that traffic in either case.
MIM 12/4/2012 | 7:38:24 PM
re: Corvis Stock Slips on Q3 Report Lighten up, people, don't get stuck into narrowing the future of opticom to the discussion of the next 2-3 years. Think big. Civilization's demand always grows, justifying "last mile" investments. People wanted hygiene - they got aqueduct. People wanted supply of heat - they got gas pipes. People wanted communication - they got phones. People wanted entertainment - they got cable. There is no doubt one of the civilization's demand will be information (as one of the previous posts has put a philosophical spin on it). At the moment DSL and cable can satisfy even the "advanced demand". But given the expected information traffic when majority of the households will want to have access, I do not see any alternative but fiber for providing appropriate bandwidth. Hence for the next 20-30 years opticom is still a pretty good business to be in.

I could be wrong: dish on the roof proved to be a good substitute for cable, without "last mile" concerns. But anything "wireless" is not really "-less" - it just propagates through surrounding, us included. I don't want to be involved into discussion of "-less" effects on our health, but to play it safe I prefer a "contained propagation" alternative.
cfaller 12/4/2012 | 7:38:22 PM
re: Corvis Stock Slips on Q3 Report gea wrote:

"Although I don't believe Corvis will start selling $200 million worth of gear in the next year or two, I wouldn't rule it out"

We're talking about $350M+ in EARNINGS, not sales. If sales are only in the $200 million range, then a CORV share will still be worth less than a 6 pack. I wonder if CORV shareholders realize this...
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