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ADVA Profits in Q2

Light Reading
News Analysis
Light Reading
7/31/2003

Metro equipment maker ADVA AG Optical Networking (Frankfurt: ADV) continues to be a bright spot in the dreary telecom landscape. The company reached its third consecutive quarter of profitability as it reported earnings for the period ended June 30.

The DWDM vendor's success in winning carrier customers seems to point to a continued demand for managed Ethernet and storage services. ADVA gained five new carrier customers during the quarter, giving it 77 carrier customers overall.

ADVA's revenues for the second quarter were €22.7 million (USD$25.7M), up 1.9 percent from the €22.3 million (USD$25.3M) reported in the year-ago quarter. The company's net income increased to €600,000 (USD$680,406), compared to a net loss of €3.7 million (USD$4.2M) in the second quarter 2002.

Siemens AG (NYSE: SI; Frankfurt: SIE) remains one of the company's largest resellers and its largest direct customer is British Telecommunications plc (BT) (NYSE: BTY; London: BTA), where it has 15,000 Ethernet circuits installed, not including the storage applications running there, according to Brian McCann, ADVA's chief marketing and strategy officer.

Two years ago, 30 percent of ADVA's sales were to carriers and some doubted whether a mostly enterprise vendor could convince big phone companies to buy its gear. Now, McCann says, 70 percent of its sales come from carriers.

Most of ADVA's carrier sales are for managed services that carriers offer to enterprise customers, the company says. "Ethernet and storage are still the dominant applications in our business," McCann says. "We're finding that enterprises would rather buy a managed service than build a network themselves."

The company projects revenues and earnings will be stable to slightly higher during the third quarter. For more on the company's origins, see this Light Reading interview: Brian Protiva, ADVA AG.

— Phil Harvey, Senior Editor, Light Reading

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