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Optical/IP

Avici Cans Kaufman, Leans on Leighton

Avici Systems Inc. (Nasdaq: AVCI; Frankfurt: BVC7) has fired its CEO, Steve Kaufman, replacing him with a 27-year veteran of AT&T Corp. (NYSE: T), William Leighton, who assumes the post on an interim basis (see Avici Boots Kaufman; Leighton Steps Up).

It shouldn't come as much surprise that Kaufman was shown the door, after several quarters of missed targets. In September, Avici announced it wouldn't hit its target of 20 to 30 percent annual revenue growth in 2004 (see Avici Target out of Reach ).

When asked if there was a financial catalyst for Kaufman's ouster, Avici chairman Surya Panditi says there was no specific event that led to the board's decision, but he praised Leighton's hands-on service provider experience as part of the change.

"Bill has significant experience building data networks, IP networks specifically," Panditi told Light Reading this afternoon. "Bill's group was responsible for the decision to bring Avici into AT&T… So he's known us from the outside looking in...

"Bill certainly can relate to what our prospects need and want," Panditi says.

Leighton has never been the CEO of a publicly traded company before, but he's had some broad responsibilities in his roles at AT&T. He did, in fact, run a 2,000-person group within AT&T, for which he had profit-and-loss responsibility, Panditi says.

Leighton's career at Avici began when he joined the company's board in May after retiring from AT&T, where his last position was that of VP of research (see Avici Adds to Its Board).

Kaufman joined Avici in 2000 as chief operating officer and director. He became CEO in early 2001, the same time Panditi was elected as Avici's chairman. Kaufman had been president of Lucent Technologies Inc.'s multiservice core networks division, responsible for the ATM and frame relay core switching, IP core routing, ATM access, and the TDM crossconnect product lines before joining Avici.

Panditi adds that Leighton's role won't be that of a babysitter while the company searches for a permanent CEO. " 'Interim' does not mean he's going to be a caretaker," he says.

Avici has AT&T as a customer, and its strategic partners include Huawei Technologies Co. Ltd. and Nortel Networks Ltd. (NYSE/Toronto: NT). None of the relationships have minimum purchase commitments tied to them, but the three were the only sources of revenue mentioned in Avici's third-quarter results, announced last month (see Avici Banks on Partners and Avici Expands AT&T's IP Backbone).

There's no current info on Kaufman's separation agreement. Per his last agreement, dated July 2000, Kaufman was in line to get 12 of salary and benefits, and accelerated options vesting, if he's "terminated without cause" or given a "significant reduction in responsibility," according to the offer letter listed in Avici's SEC filings.

Avici's shares rallied on the news of the new appointment. The company's shares climbed $0.61 (10.08%) to $6.66 in trading on Monday.

— Phil Harvey, News Editor, Light Reading

rocksolid 12/5/2012 | 1:04:47 AM
re: Avici Cans Kaufman, Leans on Leighton How can Avici's board in all seriousness expect their CEO (any CEO) to meet the objective of "30% to 40% revenue growth" for the company.

Haven't they understood they are a Tier 3 company competing head-on with Juniper and Cisco in the extremely hard to penetrate market for core IP routers?

Maybe if the objective was "sell Avici to some loser (like Nortel) in order to give the shareholders a marginally profitable exit from a dog of a company that would never have had an IPO had it not been for the Bubble" then maybe they would have a valid objective for the new CEO.

How many failed Prockets, Axiowaves, Hyperchips and Caspians will it take for investors to realize that their chances of making it in the core IP routing market are slim to none.
gotman 12/5/2012 | 1:04:46 AM
re: Avici Cans Kaufman, Leans on Leighton Rocksolid,

I didn't work for Procket....But you can't really compare Procket to Avici... Procket could have and would have done really well if they were given the support of a big brother.. Smart guys, good product..but failed to market it well..Its not all the time, cisco & juniper...its the chance.. People in asia are still buying truck loads of high end routers.

On the other hand you can market Avici till your blood dries and you'll still have problems selling it..

egotman
rocksolid 12/5/2012 | 1:04:45 AM
re: Avici Cans Kaufman, Leans on Leighton Gotman,

You are dead on. Procket product was way ahead of Avici, but Procket had one key disadvantage. They were going to market and trying to win customers post-bubble.

Avici was just plain lucky to have been able to IPO at the very tail end of the bubble. Without that extra cash hoard they would have been dead a long time ago.

It just goes to show how high the bar is to suceed in the IP core router market. For Avici to think they can survive, let alone grow revenues by 30%, is ridiculous!
materialgirl 12/5/2012 | 1:04:37 AM
re: Avici Cans Kaufman, Leans on Leighton But really, can all the losers (NT, ALA, TLAB) just hand this entire market over to CSCO or JNPR without a fight? For a mere $150M or so, is this not a worthwhile lottery ticket?
spelurker 12/5/2012 | 1:04:36 AM
re: Avici Cans Kaufman, Leans on Leighton > But really, can all the losers (NT, ALA, TLAB)
> just hand this entire market over to CSCO or JNPR
> without a fight? For a mere $150M or so, is this
> not a worthwhile lottery ticket?

Nope.
TLAB, LU, and to a lesser extent NT each have already played that game and lost. They bought companies, had saleable products with small install bases, and couldn't make new sales. ALA already has a home-grown product to sell which is more promising than AVCI, but they will largely fail too.

The core market is full. Until a vendor comes out with a strong sales team and a TRUE market differentiator, no one will break in.
materialgirl 12/5/2012 | 1:04:32 AM
re: Avici Cans Kaufman, Leans on Leighton So, what can the differientation factor be? Scale? (That is the AVCI claim). Security (1000 possibilities there)? Super deluxe MPLS? Really cheap prices?
googol_byte 12/5/2012 | 1:04:32 AM
re: Avici Cans Kaufman, Leans on Leighton If you look at the management team on the website today, it has been trimmed down to 3-4 people. I remember just a couple of months ago it had about a dozen VPs, SVPs, and EVPs listed. Does this mean more of these guys were canned too? Who's gone?
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