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Customer Questions Dog Corvis

Light Reading
News Analysis
Light Reading
1/26/2001

Corvis Corp. (Nasdaq: CORV), a manufacturer of all-optical switching and long-haul optical transport products, exceeded revenue expectations for the fourth quarter of 2000. But the primary question to emerge out of the quarterly earnings conference call was: "Where are the new customers?"

During the fourth quarter, revenue for jumped to $45 million, exceeding the range of most analyst estimates. On a pro forma basis, the company's net loss for the current quarter was $23.9 million, or $0.07 per share.

All of the quarterly revenue came from one customer: Broadwing Communications (NYSE: BRW). Corvis recently announced that Williams Communications Group (NYSE: WCG) has completed its trial and will become a paying customer this quarter. Williams has contracted with Corvis to buy $300 million worth of equipment. Corvis also expects Qwest Communications International Corp. (NYSE:Q) to become a paying customer in late 2001.

All of these customers (and potential customers), however, were announced when the company filed to go public in the spring of 2000. Since that time, the company has not annnounced any new customers. That has some people worried.

"We are concerned about the company's inability to announce any new contract wins," said Salomon Smith Barney analyst Alex Henderson in a call to clients this morning. "We had been expecting new customers in 2000, but nothing happened... we think this is a big push out and we are anxious to get new contracts."

Corvis CEO David Huber addressed such concerns in the conference call Thursday night, saying he was "working hard" on new customer contracts. He attributed delays to carrier capital budget issues.

"We have a tighter capital market and I believe that is delaying decisions on capital expenditures and new network plans," said Huber. "We expect to have new customers by the end of the first half of this year."

Other analysts said they were pleased with the revenue ramp and downplayed concerns about new customers.

"Not much went wrong at Corvis this quarter -- results were well ahead of estimates," wrote Epoch Partners analyst Seth Spalding in a research note issued early Friday morning. "Although we look forward to more customer and product diversity, management was reassuring that it will penetrate new carrier budgets and deliver new products this year."

Huber said Corvis would be developing and launching new optical networking products in 2001, including the CorWave 10Gbps transport product, scheduled for commercial deployment in the second half o the year. The company said it is also developing a "grooming switch" to feed its optical core products, but the company has not formally released the details of that product.

In mid-day trading Friday, Corvis shares lost 3.88 (-16.49%) to 19.62.

--R. Scott Raynovich, executive editor,Light Reading http://www.lightreading.com

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Scott Raynovich
Scott Raynovich
12/4/2012 | 8:58:56 PM
re: Customer Questions Dog Corvis
do you anticipate Corvis landing significant new customers in 2001? Who might they be?
HarryPotter
HarryPotter
12/4/2012 | 8:58:55 PM
re: Customer Questions Dog Corvis
hey scott-

My industry sources tell me Corvis is working with a major european PTT who will not let them announce yet. But it seems like the ULH opportunity would be bigger in asia than europe so i'm not sure a major european announcement will please people. any other thoughts?
Peter Heywood
Peter Heywood
12/4/2012 | 8:58:54 PM
re: Customer Questions Dog Corvis
I'll take a wild guess -- France Telecom -- for 2 reasons:

1. Corvis acquired Algety to boost its ultra-long-haul developments. Algety was spun out of CNET, France Telecom's research labs.

2. Corvis has shifted quite a lot of its UK staff to France, where it's setting up a facility in Sophia Antipolis.

Peter
HarryPotter
HarryPotter
12/4/2012 | 8:58:48 PM
re: Customer Questions Dog Corvis
hey peter-

guess i gave it away. what do u think, is this what people want to see or is it a let down?
Peter Heywood
Peter Heywood
12/4/2012 | 8:58:45 PM
re: Customer Questions Dog Corvis
If (big if) it's true - ie that Corvis's next customer will be France Telecom - then I think it would be incredibly significant, not only because FT is a big player but also because it might (big might)demonstrate that Corvis's transmission equipment can be used on legacy fiber infrastructure - a possible snag that came out of the piece I just did on Ilotron (see:http://www.lightreading.com/do...

Peter
dtj4000
dtj4000
12/4/2012 | 8:58:12 PM
re: Customer Questions Dog Corvis
Peter,

Interested in your Ilotron piece, but the link isn't working.

Dave
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