Customer Questions Dog Corvis

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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