Corvis Makes More Cuts

Corvis Corp. (Nasdaq: CORV) confirmed Wednesday evening that it will cut approximately 180 more employees from its ranks as it continues to take down its operating expenses (see Corvis Lays Off 180). The company characterized the staff cuts as a consolidation of its R&D group.

"Due to the level of maturity and state of our product lines, we are able to use our research and development resources more efficiently," says Andrew Backman, Corvis's VP of investor relations. "This is part of an ongoing effort to lower our operating costs in line with the current market dynamic."

On Wednesday morning, Light Reading reported that, according to its sources, Corvis was going to cut between 200 and 250 jobs.

Corvis says Wednesday's cuts, as well as the reduction of about 164 jobs in its French subsidiary, will bring its headcount below 500 employees by the end of the first quarter 2003. The company's stated goal is to take its operating costs down to around $25 million a quarter, or below.

It's an aggressive goal, but Corvis has already reduced its quarterly burn rate remarkably. Corvis had a burn rate of $35 million in the third quarter of 2002, down from a rate of $148 million in the first quarter of 2001.

Indeed, with its stated cash and investments of $504 million and no debt, Corvis could run its business well into 2007 with little or no sales at all.

Of course, that's not the company's intent. Corvis says its level of engagement with carriers is as high as it's ever been.

Corvis is rumored to be in the running for an AT&T Corp. (NYSE: T) contract in the range of $50 million. But Ciena Corp. (Nasdaq: CIEN) is also said to be close to winning this deal, and it has already sold to an AT&T subsidiary (see Ciena's Optical Switch Fiesta). Analysts say it's a long evaluation process that isn't going to wrap up anytime soon.

— Phil Harvey, Senior Editor, Light Reading
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Opty-Op 12/5/2012 | 12:45:50 AM
re: Corvis Makes More Cuts Actually, this could be good news. If companies like AT&T look for their vendors to cut headcount so they can't keep up with R&D AND they look for vendors to cut their headcount so they have less people to provide technical support AND they looked for their vendors to cut headcount so manufacturing would be slow AND.......

Does anyone remember the Qwest deal where the $100m contract went to $10m with no actual product purchased? Actually, that could have been good news because Qwest probably loved the technology and wanted to purchase more but they had to make sure Corvis wasnGÇÖt bogged down with so much equipment production that Corvis couldnGÇÖt lay off more employees to get more customers.

Such logic .......

-----> :-) <---------
photon_mon 12/5/2012 | 12:45:44 AM
re: Corvis Makes More Cuts Opty-Op,

You're dead on. On the surface at least, it DOESN'T make sense to reduce headcount in order to impress a prospect. Especially with a potential deal "reportedly" so close to fruition.

Much more understandable to do so in preparation for being ACQUIRED. Or obviously to simply slow one's burn rate. It just is more than a bit irritating to be handed such a LAME (possible) explanation for separating so many folks from their jobs.

Ranks right up there with "the dog ate my homework".

Reading the article (and admittedly I'm not the most observant person on the planet, so if I overlooked something obvious, let me know), I don't know if Corvis P.R. gave this impression, or if it's Phil's possible theory.

Who knows? Big dogs like AT&T have been known to make vendors go through some (per my experience, at least) bizarre contortions during the courting process. Maybe in some cases they are ploys just to, either: a) make the vendor go away and stop annoying them, or, b) see just how stupidly, soul-sellingly desperate the vendor is to chase that carrot.

I can picture some of these bored and jaded AT&T dweebs at the bar, dreaming up these "truth or dare" stunts for next morning's vendor meeting: "Okay, here's the deal. YOU push this peanut with your nose across the conference room, around the lobby, and back to us. If you do it within 5-minutes, without help or using your hands to move obstacles, then we will grant you your lab trial!".

joe_average 12/5/2012 | 12:45:35 AM
re: Corvis Makes More Cuts Check out:


180 more engineers looking for work. :-(
Eye-in-the-Sky 12/5/2012 | 12:45:34 AM
re: Corvis Makes More Cuts with "the dog ate my homework".

It REALLY did!!!
puddnhead_wilson 12/5/2012 | 12:45:31 AM
re: Corvis Makes More Cuts >Dear Reindeer, I, DOCTOR David Huber, have decided to respond to your issue directly. I find that this will allow me to clear the air once and for all....

Wow, talk about a DEAD-ON impersonation ... ;)

dave77777 12/5/2012 | 12:45:21 AM
re: Corvis Makes More Cuts Hmmm, what a surprise, a company looking to cut cash burn is laying people off. Our next breaking LR news story: Grass is green! I am also hearing rumors the sky may be blue.

For the record gea, I own Corvis at an avg price of $1.33. Corvis is a relatively small holding for me anyway, and won't affect my vehicle purchases one way or the other. But if you're nice to me, when Corvis hits 5 maybe I'll upgrade you from your Pinto :)

I see zweisel is still obsessed with me, but sadly for him I don't care.
metamucil 12/5/2012 | 12:45:17 AM
re: Corvis Makes More Cuts
Sorry, the forum took 5 minutes and did not do anything except sit there waiting. So, I hit stop and resubmitted. Both posted.

Sorry, I picked on one of the most arrongant people on the planet. He also tends to line his own pockets at the expense of his shareholders.

There is NO business here. Time to either:

1 - Give the money back and call it a day
2 - Invest it in a real business like McDonalds Franchises.

The Board of Directors is clearly not doing their job and at risk of not performing their fiduciary responsibility.

gea 12/5/2012 | 12:45:15 AM
re: Corvis Makes More Cuts Dave7777:

Well, I didn't really think you bought Corvis at $200, though I DO think you're rather unrealistically optimistic about their chances.

This morning Merryll Lynch gave them an interesting report. Amongst other things, if they can get their burn rate a little lower they'll have enough cash until 2006.

As for me, I think Corvis should stay the course. And frankly, what option do they have? (Start making ethernet switches? Next-gen SONET gear?) There's not a LOT they could do other than what they're currently doing, so I've no problem with the idea of them putting all their chips on ULH and undersea (because they'll go out of business anyway even if they try to get into some other market).

And despite the fact that Huber is according to many accounts a little koo-koo and quite a bit arrogant, that's what you NEED in a CEO (well, in moderation at least). He's willing to sink or swim based on the original vision, and for me that's an interesting stock.
opticalwatcher 12/5/2012 | 12:45:14 AM
re: Corvis Makes More Cuts What a bunch of little schoolgirls. Some of this conversation reminds me of grade school. Remember the kid everyone picked on? The real dweeb? Well, that dweeb is eating your lunch while you sell cars or work in the supermarket stacking lettuce. So what if Huber is a little (or a lot) arrogant. He's a CEO of a company and who the hell are you? He isn't lining his pockets with money, he's earning money by developing an idea and selling a product. Will it work longterm? Will his company be the next Cisco? Who knows, but he's a better person for trying while people like you sit around complaining about all the things he has while you have nothing.

Here's my advice, its free:
Get an education,
work smart,
have goals,
and take a look in the mirror from time to time.

lightmaster 12/5/2012 | 12:45:14 AM
re: Corvis Makes More Cuts "...what option do they have?"

Corvis currently holds $504 MILLION that it obtained from investors on the premise that they would build a succesful business that generated multiple billions a year in revenue. To imply that the only option is to slowly loose the investors half a billion dollars quarter by quarter until the company goes away is not accurate.

IF they have a viable plan to become profitable in the next 12-24 months, fine. If not, then they should seek a buyer for the technology and return the money to the stockholders.

Look at it this way. Suppose Corvis is out of money, but a group of their stockholders has half a billion in the bank. Should they invest more in in Corvis to keep them alive for 5 more years or let Corvis liquidate? Of course, they would look at whether or not there was a clear plan to return profits on that money. In Corvis' case, I don't see the plan.

The difference in this case is that the investors don't have a choice because Huber already has their money, given to him on assumptions that he would build the next Cisco. He controls the company and can spend their $500m as he sees fit. He cannot be fired because he controls the BOD.

Of course, Huber will not consider the liquidation option himself. It's not like he wants the money for himself like the Enron, WCOM, or GBX executives. He honestly believes in his technology and will maintain control of the company not because he is greedy, but because he thinks he knows best. Not a bad person, just misguided IMO.
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