AT&T Makes Avici's Quarter
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