AT&T Boosts Avici's Q4

Avici Systems Inc. (Nasdaq: AVCI; Frankfurt: BVC7) reported an exceptional fourth quarter this morning thanks to increased Internet traffic at its largest customer, AT&T Inc. (NYSE: T).

The core routing also-ran reported earnings of $3 million, or 21 cents per share, on revenues of $15.9 million. (See Avici Reports Q4.) That compares favorably to the company's year-ago quarter, when it lost $8.6 million, or 67 cents per share, on revenues of $6.1 million.

The company said it expects to bring in revenues of between $45 million and $55 million in 2007, a projection that exceeds analysts' expectations. Avici shares were up $1.27 (16.84%) to $8.81 in late morning trading on Thursday.

As AT&T goes, so goes Avici. The carrier's increased Internet traffic needs helped boost Avici's quarter, and the router vendor expects the carrier to be responsible for about 90 percent of its total revenues.

Realizing that such a reliance on one customer is not sustainable, Avici announced the launch of a new business unit: Soapstone Networks. (See Avici Forms Business Unit.) The Soapstone unit will sell a software package to carriers to help them track how well their networks are meeting customer expectations and service-level agreements. The software is said to be based on standards that allow it to work regardless of what routing, switching, and networking equipment the carrier has installed.

Avici is not expecting to gain any significant revenues from Soapstone in 2007 and acknowledges that it will go into the year still relying heavily on AT&T in its core router business. Soapstone is expected to make a financial impact on Avici's earnings next year.

— Raymond McConville, Reporter, Light Reading

materialgirl 12/5/2012 | 3:14:30 PM
re: AT&T Boosts Avici's Q4 It seems that AVCI breaks the rules. They have one marquee customer that seems very loyal, but cannot get a second, anywhere in the world. Then, that customer does not seem worried about such reliance on such a cash-poor and dependent supplier, which seems risky to T long term. Very strange.
opticalwatcher 12/5/2012 | 3:14:30 PM
re: AT&T Boosts Avici's Q4 ATT has now grown to cover much of the US.

Having one customer is not necessarily such a bad thing as long as that customer is really big. As long as you can keep that customer happy, you've got it made.
twill009 12/5/2012 | 3:14:29 PM
re: AT&T Boosts Avici's Q4 I believe Avici disclosed last year that Limelight is no longer planning to use its equipment.
Pete Baldwin 12/5/2012 | 3:14:29 PM
re: AT&T Boosts Avici's Q4 It's been rumored for some time (and been mentioned on Avici's earnings calls) that AT&T is close to qualifying some other vendor for the core.

So, AT&T is apparently doing something about it. As is Avici, with this whole Soapstone thing.

As an aside, Avici did end up with a semi-marquee customer in Limelight. No one cared back in 2004, but the CDN business is pretty hot now.
twill009 12/5/2012 | 3:14:29 PM
re: AT&T Boosts Avici's Q4 I have thought this for awhile, but i suspect that their single customer is not going to last. This excerpt is from the conference call this morning:

Deferred revenue at December 31 was $9.6 million. The balance remaining in deferred revenue primarily represents the deferred and unearned portion of customer maintenance and support revenue which will be amortized into service revenue over the term of the related contractual service periods. The deferred revenue balance also includes deferred product revenue on customer shipments for which revenue recognition criteria has not yet been met. We anticipate a significant portion of our deferred revenue to be recorded as revenue during the fourth quarter of 2007.

If def rev is going drop significantly at the end of the year, i presume that is based upon the ongoing business with that customer dropping off as well.
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