Avici Hits Q1 Snag
"Uneven customer order patterns" will lead to revenues between $6 million and $8 million for the quarter ending March 31, CEO Steven Kaufman announced (see Avici Provides Q1 Guidance). That would be down from revenues of $11.5 million in the previous quarter and on a par with revenues of $7.6 million from the first quarter of 2003 (see Avici Narrows Losses in Q4).
Analysts had expected revenues of $10.9 million for the March quarter, according to MultexNet. Avici shares were down 16 percent, to $13.67, in early trading today.
The shortfall is tied to "orders we expected would be done by the end of March" and cannot be pinned to one customer, says Esmeralda Swartz, Avici vice president of marketing. The orders are expected to resurface in future quarters, she says.
Swartz says the shortfall is not a sign of trouble with the Nortel Networks Corp. (NYSE/Toronto: NT) partnership announced in January (see Avici, Nortel Get 'Strategic'). The partnership, which has Nortel integrating and selling Avici's core routers, is progressing well but isn't expected to bear fruit for a couple more quarters.
Analyst Alkesh Shah of Morgan Stanley notes investors might have jumped the gun in raising Avici's stock price after the Nortel deal was announced. "Shares have risen ahead of fundamentals on the partnership agreements with Nortel and Huawei, which we believe will not have a meaningful impact on results until the [second half of 2004] and 2005," he writes in a research note today.
For the year 2004, Avici expects revenues to be 20 to 30 percent higher than last year's figure of $37 million. Analysts expect Avici's losses -- which coincidentally totaled $37 million for 2003 -- to continue throughout 2004.
Avici can take some comfort in not being alone. Despite signs of recovery, a number of companies have encountered revenue glitches this quarter (see Ciena Falls Short, Agere Suffers Hutch Hiccup, and Enterasys Lowers Q1 Outlook).
— Craig Matsumoto, Senior Editor, Light Reading