Avici Drums Up Another Customer
The company announced today that Global NAPs, a national carrier for voice and data services, has deployed Avici Systems SSR Routers as part of its nationwide network expansion. On October 3, it also announced that Qwest Communications International Inc. (NYSE: Q) was deploying the SSR in five of its points of presence as part of its national broadband buildout. This deployment is part of Qwest’s contract with Avici that dates back to October of 2000.
While any customer win in this economic climate is seen as a good sign, it’s hard not to notice that the company made the announcement the day before it is expected to announce disappointing third-quarter results. Coincidentally, the company also announced the Qwest deployment the day the company warned Wall Street that it would record higher than expected losses and fall short of its revenue expectations.
What's it all mean? Any new announcements are important. The company has relied primarily on AT&T Corp. (NYSE: T) as a customer since its inception. It has also announced deals with Taiwanese Chunghwa Telecom Co. Ltd. and the bankrupt Enron.
Avici has announced customer trials with carriers like France Telecom SA (NYSE: FTE), Deutsche Telekom AG (NYSE: DT), and Williams Communications Group Inc., but these have yet to bear fruit. Expanding its customer base is crucial, as Avici has been running a distant third to Cisco Systems Inc. (Nasdaq: CSCO) and Juniper Networks Inc. (Nasdaq: JNPR) in the IP core router market for the past two years.
When it pre-announced its earnings earlier this month, the company said that AT&T accounted for more than 10 percent of its business for the quarter. No big surprise. But what is surprising is that Qwest was a 10 percent customer in the quarter, too.
And now Avici has announced another customer win, showing that even in a depressed market it is still making strides to increase its customer base.
But the fact remains that even with these customers Avici has still been missing expectations, which is not surprising given the poor performance of the market leaders: Juniper and Cisco (see Juniper's Good News Fails to Impress). After the news was announced, the company's shares ended the day unchanged, at $0.68. On October 3, the day of the pre-announcement and the Qwest release, it held steady at $0.60.
Avici will release its third-quarter financial results tomorrow before the market opens. In the pre-announcement, the company stated that it expects to lose $0.32 to $0.34 a share in the quarter, excluding costs related to its recently announced job cuts and other one-time items. In the year-ago quarter, it lost 39 cents a share. Its revenues are expected to be around $7 million.
In late September, Avici said it would cut almost a quarter of its work force and was seeking shareholder approval for a 1-for-5 reverse stock split to help ensure its continued listing on the Nasdaq exchange.
— Marguerite Reardon, Senior Editor, Light Reading