Avici Banks on Partners

Core router vendor Avici Systems Inc. (Nasdaq: AVCI; Frankfurt: BVC7) remains bullish about its future prospects despite a weak third quarter and a lack of immediate financial visibility (see Avici Reports Q3 Results).

The company warned late last month that its third-quarter numbers would be low, and it was right (see Avici Target out of Reach ). Having achieved revenues of $12.1 million in its second quarter, the latest three months to the end of September saw revenues of just $3.7 million, and a net loss of $10.4 million, or 82 cents per share.

Following last month's warning, analysts revised their outlook, and had expected revenues of $3.4 million and a per share loss of 75 cents.

Although the market was prepared for such numbers, Avici's stock still took a hammering in early trading this morning, dipping $0.37 (5.42%) to $6.42.

In March of this year, the share price was $24.38, nearly four times its current value.

But despite all this, CEO Steve Kaufman is still putting on a brave face. He's confident Avici will benefit from a general shift towards converged, IP-based core networks by the world's major carriers. In a conference call this morning he cited the company's success with its main carrier customer, AT&T Corp. (NYSE: T), which is building its new backbone using Avici's TSR routers, saying that other carriers would follow its example. "Legacy, competitive core routers are not designed for the demands of today's services, such as VOIP," said Kaufman.

He also said there has been a significant increase in the number of core router RFPs (request for proposals) in recent months, and that Avici is working with both of its major partners, Huawei Technologies Co. Ltd. and Nortel Networks Ltd. (NYSE/Toronto: NT), on "a number of bids and RFPs that are due to deliver new business in the next few quarters."

"Carriers need new core networks. Their current infrastructure is running out of gas," said the CEO. But those carriers could still turn to Avici's chief rivals, Juniper Networks Inc. (Nasdaq: JNPR) and Cisco Systems Inc. (Nasdaq: CSCO).

Kaufman wouldn't be specific about the number of bids or trials in which Avici is currently involved, and the CEO said the outlook is still too uncertain for him to provide any guidance for fourth-quarter or 2005 revenues. Carriers "are displaying some caution over their capex as they make their plans for 2005." Kaufman claimed his company has a good handle on how things are progressing, and that Avici is a long way down the line with some of its prospects, but "the big uncertainty" is when operators will actually get off the pot and sign off on some purchase orders.

— Ray Le Maistre, International News Editor, Light Reading

Be the first to post a comment regarding this story.
Sign In