Corning May Sell Avanex Stake
Corning's representative, Joseph Miller, will step down from Avanex's board on Oct. 27, Avanex announced yesterday. Avanex attributed the move to Miller's "expanded responsibilities" at Corning. Avanex also lost its CFO, Rich Yonker, yesterday (see Avanex CFO Leaves ).
The CFO's departure grabbed the headlines, but Miller's decision might have bigger implications for Avanex, as it's believed Corning is getting ready to drop its remaining 10.7 million Avanex shares, a 7.4 percent stake.
That's because Corning will be free to sell the shares as of Oct. 1. Corning obtained 21 million Avanex shares in 2003, when Avanex acquired optical components divisions from Corning and (see Avanex to Buy Alcatel, Corning Units). The contract puts restrictions on how much stock Corning can sell, but Corning has been taking advantage lately by selling what shares it can.
"It's my belief Corning is going to sell all its remaining shares once it's allowed to," says Dave Fore, an analyst with Sur Terre Research LLC.
Fore takes Miller's departure as good news. It's further evidence that Corning wants out, and a quick selloff might be less painful for Avanex's stock.
"There's been an overhang on the stock since Corning started selling its shares," Fore says. "I feel there are investors out there who would be willing to take the stake Corning has."
Corning isn't spelling out its plans precisely, but the company has told Avanex it's not nominating a successor to Miller, according to Avanex's proxy statement filed with the SEC yesterday. "We have been selling those shares periodically and will continue to do so," a Corning spokesman says. "It's not our habit to hold onto company shares long-term."
Alcatel, which also got stock in the Avanex acquisitions of 2003, still holds 35.4 million Avanex shares, according to Avanex's proxy statement.
Yonker's departure, meanwhile, is a "job-fit" issue and not necessarily a sign of trouble, Fore says. Still, Yonker was on the job only five months, and investors weren't keen on his quick exit. Avanex stock was down $0.06 (6.7%) at $0.84 in late trading today.
About that stock price: Avanex got a warning from Nasdaq last month, saying the company risked delisting if its stock price remained less than $1. Avanex has until March to correct the situation (see Nasdaq Warns Avanex ).
— Craig Matsumoto, Senior Editor, Light Reading