Avici: Going Out on a High

Having announced its exit from the core IP router market, Avici Systems Inc. (Nasdaq: AVCI; Frankfurt: BVC7) saw its share price leap 28 percent in pre-market trading this morning after it raised guidance for the year.

In April, Avici announced its intention to quit the router game and concentrate on its new business unit, Soapstone Networks Inc. (Nasdaq: SOAP), which is developing service management technology. (See Avici Abandons Routing, Targets PBT and The Core Was Rotten for Startups.)

The reason for quitting? Avici's revenues come almost exclusively from one customer, AT&T Inc. (NYSE: T), and it figured that source of sales wouldn't last forever. (See Cisco Gets the Call for AT&T's Core.)

So AT&T has bumped up its order, making sure it has enough Avici gear to see it through the coming years before the vendor hits the Off switch on its router production line.

The result? Avici has today reported second-quarter revenues of $29.6 million, its best-ever quarterly performance, and net income of $12.1 million, or $0.82 per share. Wall Street had expected revenues of $15.8 million and earnings of $0.21.

And Avici is expecting its hot streak to continue for the rest of the year. Its revenues for the first six months are $50.2 million, but it expects to better that in the second half, as its full year guidance is now $110 million to $125 million, "including final router shipments," with the wide range attributable to the "timing of manufacturing and final shipment dates."

Avici's previous guidance for 2007 was $50 million to $60 million.

The numbers sent Avici's stock up by $2.33, nearly 28 percent, to $10.75 in pre-market trading Thursday morning.

What this means, though, is that Avici will, starting next year, be pretty much relying on its Soapstone unit, which showed off its wares at the NXTcomm event in Chicago last month, to bring home the bacon. (See Soapstone Intros PNC for PBT.)

CEO Bill Leighton told today's earnings conference call that Avici has been in discussions with vendors and carriers about Soapstone's provider network controller (PNC), which, says the CEO, is due to be in beta tests with potential customers in the fourth quarter. (See Nortel Pushes PBT Pact.)

He said Soapstone will generate "minimal revenues" in 2007, but this will "ramp in 2008," though no guidance is being provided. The company's CFO, Bill Stuart, says some guidance will be provided when Avici reports its full-year results early next year.

Avici has $61.1 million in cash and cash equivalents and no debt. Stuart says this is enough to fund the company's new business plan.

— Ray Le Maistre, International News Editor, Light Reading

digits 12/5/2012 | 3:05:14 PM
re: Avici: Going Out on a High At 10.55am, Avici's stock is trading up 44%.... no, 45%, no....
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