AT&T Makes Avici's Quarter

Top customer AT&T Corp. (NYSE: T) helped boost Avici Systems Inc. (Nasdaq: AVCI; Frankfurt: BVC7) revenues nearly 30 percent in the second quarter of 2003. But the company is still losing money.

This morning Avici reported gross revenues of $9.8 million, up 29 percent from first-quarter 2003 revenues of $7.6 million. GAAP net loss for the quarter was $11.3 million, or $0.92 per share, compared to a GAAP net loss of $15.0 million, or $1.21 per share in the previous period.

Though it maintains a strong cash position, Avici is still leaking green. Its cash, marketable securities, and long-term investments decreased by about $8.5 million, bringing its new total to $103.5 million.

The increase in revenue was mainly due to additional sales to AT&T, which added Avici gear to three new points-of-presence this quarter. Avici is now in 13 cities within AT&T’s network. The carrier also ordered additional line cards for existing routers to keep up with broadband traffic growth from the addition of Comcast Corp. (Nasdaq: CMCSA, CMCSK) traffic (see AT&T Completes Comcast Merger).

While the AT&T boost is certainly good news, it highlights Avici’s continued dependence on a single customer. Even though the company recognized revenue from Huawei Technologies Co. Ltd., WilTel Communications Group Inc. (Nasdaq: WTEL), and Qwest Communications International Inc. (NYSE: Q), AT&T was the only 10 percent customer and admittedly represented the bulk of the company’s revenues.

"We are delighted that AT&T has continued to grow their network," Avici CEO Steve Kaufman tells Light Reading. "But clearly, we are also looking to broaden our customer and revenue base through additional channels."

While the company says it is still actively pursuing the U.S. carrier market, it's also looking overseas. During the quarter, it announced a partnership with Chinese telecom equipment maker, Huawei (see Avici Joins Huawei for China Push). The company has only shipped a few products for testing. More meaningful revenue from the deal isn't expected until at least the first part of 2004.

As for the future, Kaufman seems to realize that the company’s dependence on AT&T is risky. For the coming quarter, he says revenues will likely be flat to slightly up. Beyond that, he says visibility is too limited to make specific projections.

“However,” he adds, "we are optimistic about the future, given our progress with trials, our evolving channel relationships, and our sales pipeline."

Avici's outlook may be improving, but it still has a long uphill battle ahead. In the first quarter of 2003, Avici only had about 2 percent of the worldwide core routing market, according to Infonetics Research Inc. Leading the market is Cisco Systems Inc. (Nasdaq: CSCO) at 72 percent, while Juniper Networks Inc. (Nasdaq: JNPR) is at about 21 percent. These figures have been stable over the past several quarters, according to Infonetics.

Plenty of startups also want to get a foot in the door of the core routing market. Caspian Networks, Chiaro Networks, Charlotte’s Web Networks Ltd., Hyperchip Inc., and Procket Networks Inc. have all developed products. Procket looks to be the most promising. It has already won business in Asia. But the company is going through some internal struggles that could stall its chances for success (see Procket CEO Resigns).

— Marguerite Reardon, Senior Editor, Light Reading

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echo2 12/4/2012 | 11:43:24 PM
re: AT&T Makes Avici's Quarter The bubble must really be back!!!!!!!

My options are going to make me rick!

skeptic 12/4/2012 | 11:43:24 PM
re: AT&T Makes Avici's Quarter
- Quoting the 30% number in the article creates
an incorrect impression. Year-to-year, it was
around 5%. And 30% only looks good when compared
to the disaster of last quarter. And even the
5% is rather suspect.

- As far as ATT goes, I've given up trusting
anything Avici says. The revenue this quarter
suggests nothing significant has happened.

- The revenue recognized from Qwest is a joke.
Qwest isn't a real customer in any meaningful
sense of the word. Neither is Wiltel.

And you should stop treating charlotte's web
as a core router vendor. Nobody treats them
seriously in that space anymore.

As far as Hyperchip goes, are they still even

IP Observer 12/4/2012 | 11:43:23 PM
re: AT&T Makes Avici's Quarter Give them a break, these guys have made good progress. What other core router vendor has been able to take on Cisco and Juniper? The startups? Most will unfortunately go by the way of Pluris, IronBridge, Nexabit,etc.. Even Procket with Tony Lee pedigree is unlikely to make it, bubble days are over.

13 of the largest PoPs in the world are using Avici routers. And let us not forget who was deployed in AT&T's backbone before Avici--Cisco. Good for them.

The industry needs vendors to take on Cisco and Juniper and win if we are ever going to improve the quality of IP networks. Did we forget the fiasco of last week with Cisco security flaw and the other times Cisco and Juniper routers have causes network outages?
It took hours to install the patch on Cisco routers. There are no such things as timely scheduled maintenances that don't impact your business when you have global customers.

And they've signed OEM with one of the few vendors in world that Cisco is afraid of, Huawei.

Don't know if anyone listened to call, but Avici also deployed only scalable router in multi-chassis configuration in REAL network, AT&T. This is significant because it proves that it can be done and that there is need.

Negatives and we know what those are: Clearly need additional new customers and need to drive to profitability, no question. But, they are the only ones that have a chance at taking on Cisco and Juniper in core.
optical_man 12/4/2012 | 11:43:22 PM
re: AT&T Makes Avici's Quarter IP Obs, and Skeptic,
Can you tell me the 13 PoP's using Avici? (or are all the PoP's ATT's?)
Also, where have they been rejected? Any names there?
beetlejuice 12/4/2012 | 11:43:22 PM
re: AT&T Makes Avici's Quarter Sounds like a strong buy signal that I will not miss. Buying 1,000 shares, $160 / share is just around the corner.
skeptic 12/4/2012 | 11:43:22 PM
re: AT&T Makes Avici's Quarter Avici has been saying the same things and pushing
its single-customer win for several years now.
Quite frankly, everyone who has looked at it
has for the most part walked from it and Avici.

Avici's finances are no better than a startup.
And its not a matter of winning new customers
anymore so much as it is getting back in the
door of places where avici has already been
evaluated and rejected.

Cisco is scared of Huawei, but so is everyone
else in north america who has ever tried to
work with them. Avici has attached itself
to a shark whose only interest in north america
is technology transfer. Huawei doesn't want
a partner, its wants technology.

Avici offers poor customer support, an aging
architecture and a list of broken promises
thats very long. If you (as a vendor) tell
me you can solve a problem and then show up
with unstable software that falls on its face
in the first uncontrolled test, you have ZERO

Avici is NOT taking on cisco or juniper. They
are standing still with one win they got from
the bubble.
DarkWriting 12/4/2012 | 11:43:21 PM
re: AT&T Makes Avici's Quarter Avici's finances are no better than a startup.
And its not a matter of winning new customers
anymore so much as it is getting back in the
door of places where avici has already been
evaluated and rejected.


No Problem, they can always follow the "easier to get forgiveness than permission" strategy and get their foot back in the door with a lowball price. A sales whore will always be let in the door, at least until it is rediscovered that s/he is diseased.

IP Observer 12/4/2012 | 11:43:19 PM
re: AT&T Makes Avici's Quarter You are right Avici has been saying the same things-scalability and reliability--they've sounded like a broken record. But, they are the only ones to have actually delivered a scalable router and shown self-contained stateful failover working.

Now, look at all of the startups saying the same thing without having a working product. And let's not forget Cisco and Juniper jumping on the scalability and reliability bandwagon. Why is everyone talking about it? Because carriers need it or no one would pay attention. The best indicicator was Juniper shipping an unfinished product with T640. They have yet to deliver TX and based on what I've seen it won't be working anytime soon.

I agree with you on the one significant customer win with AT&T, but if you're going to have one key customer then AT&T is one of the best to have. If they didn't have stable routers as you indicate, AT&T would not continue to deploy additional PoPs with their gear. You may had a bad experience with them in past, but product is stable and blows doors off Cisco and Juniper. That is coming from not only AT&T, but others.

What happened to Avici is simply timing. When they came out, most US carriers had just finished upgrading their backbones to Cisco and Juniper and even if Avici presented a compelling value proposition, it would be difficult to justify spending for additional backbone gear when you did not need it.

We are at the end of the cycle and cannot continue to push out equipment purchasing decisions. Decision for new gear will be made this year and the requirements are for something very different than Cisco and Juniper.

The new startups that have come out don't have a prayer as they have not been through the testing required to stabilize products in a carrier network. No carrier today would waste time or take risk of helping router vendor finish development. Might use them to push one of the others, but would never seriously consider moving them beyond a lab, too painful.
skeptic 12/4/2012 | 11:43:18 PM
re: AT&T Makes Avici's Quarter You are right Avici has been saying the same things-scalability and reliability--they've sounded like a broken record. But, they are the only ones to have actually delivered a scalable router and shown self-contained stateful failover working.
It was more like a "self-collapsing stateful
failover" the last time I heard anything about
it. The test reports from carriers I've heard
were not good. It was a "toy". If you push
at it, it falls over.

As far as ATT, Avici got into ATT because of
the bubble. Their challenge now is to even stay
at ATT. As far as deploying additional POPs,
we only have Avici's word on that. And from
my experience they have a track-record of
distorting what actually happens at ATT. The
numbers for this quarter don't suggest that
additional POPs are going in. The numbers Avici
did suggest fill-out of existing capacity is

As far as "blowing the doors" off anyone, I've
heard either the exact opposite or nothing
at all. They blew right out the door at Qwest.

And as far as trusting Avici's "stability",
you can't play that game with me. Avici has
never gone head-to-head with another vendor.
They ducked the light reading test. Even
Charlotte's had more guts than Avici did.
And when they contracted for third-party testing,
they set a bar so low and so vague that it was
difficult for them not to fail.
andropat 12/4/2012 | 11:43:17 PM
re: AT&T Makes Avici's Quarter IP Observer,

you are just that.. an observer. Avicis has done some "better" things because they started a little later and knew more of what the industry wanted in a core router.. failover, in-service upgrades, etc., As far as Juniper they have never missed a s/w deadline nor a h/w deadline.. 1st to oc48 linerate.. 1st to oc192 linerate and first with a product that will deliver oc768 and scales.. as avici but not with sorry ass copper interconnects that force you to rack those beastly things side by side.

The TX is not a product nor is oc768 because if you havent "observed" the economics and the demand for N numbers of chassis nor a 40G lambda are there yet. Why pour dollars into the continued development of technology that isn't ready for customer demand. Probably why Juniper continues to beat earnings and not a measly ass 7 or 9M per quarter.. try 150plusM per quarter.

I like Juniper routers as although not perfect they suck a hell of alot less than crisco. 90% of those outages you speak of I had to deal with and they were not a result of JUNOS but that shit called IOS. So start observing and do less babbling until you know technology and know economics. go buy some more avici shares.

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