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Optical/IP

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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lightmaster 12/5/2012 | 12:44:53 AM
re: Corvis Makes More Cuts "Buying a stock seems to me to be exactly like buying a lottery ticket."

Herin lies the whole problem with the tech stock bubble. Buying a stock used to mean investing in a business that had strong business prospects, and good financials. The valuation of the company was tied to the revenue and profitability of the company. Sure, there is always a risk involved, but it is a calculated risk based.

In the bubble, buying stock meant putting money into a lottery ticket hoping it would pay off big. Nobody cared whether the companies valuation had anything to do with business prospects. The result was that stock prices became totally unrelated to business prospects and financials. Thats how you got companies like Corvis and Sycamore with tens of billions of valuation with little revenue based purly on stock speculation.

By the way, I don't blame Corvis or Huber for this. I blame the people who spent $100 for the lottery ticket when it was only worth 75 cents.

rpm23 12/5/2012 | 12:44:51 AM
re: Corvis Makes More Cuts The (additional) challenge is that there is not a lot of M&A activity except by deep pocketed companies like Cisco. I am not sure Cisco is going to buy any more optical companies.

Actually, Corvis might consider shelving its ULH product for now. It can use its cash to buy a optical company/product (candidates ??)which is actually making some money now instead of Dorsal type companies that it has bought in past. Sycamore was trying to do this (according to rumours) and buy the LU ATM business. Once there is some cash flow and ULH market comes back, it can revive it.
puddnhead_wilson 12/5/2012 | 12:44:51 AM
re: Corvis Makes More Cuts gea - you are right on the ULH & RBOCs. But when I was talking about RBOCs, I was thinking of switches, not that. I don't think there is a market anymore for a ULH niche player, even an LH+ULH -- just as automotive partts companies can no longer sell just transmission components (e.g.) and compete. And if there is, the company needs to show prospective customers that it can focus on making sure it will still be there for service & upgrades, and not appear to have a greater interst in pursuing a personal agenda on the part of management in exploiting its financila resources (here I am thinking of the Dorsal deal, which really did nothing to strenghten CORV's long-term position, and Corvis buying components from Huber-owned/run suppliers, among other things. It looks enough like a giant shell game to suck up the money, to enough people, to give pause to even the most enthralled potential customer).

This of course is all my opinion. But it is not just MY opinion -- and that is the real point.
puddnhead_wilson 12/5/2012 | 12:44:39 AM
re: Corvis Makes More Cuts >It can use its cash to buy a optical company/product (candidates ??)which is actually making some money now instead of Dorsal type companies that it has bought in past.

But Huber doesn't have stakes in any companies that are making money right now :) Even if he did, he probably wouldn't want to see such a gem tied to the mast of the Good Ship SS Corvis, it's only the smaller boats with the bigger holes in the hull from his fleet that he is pulling people abourd from :)

Heck, Huber doesn't have stakes in any companies that have REVENUES right now, let alone profits.
madtech 12/5/2012 | 12:44:34 AM
re: Corvis Makes More Cuts "Corvis buying components from
Huber-owned/run suppliers, among other things"

Buying components that are needed that are not made by any vendor coupled with the fact that component vendors are not going to build a "special" component for something that works a bit differently is what drove Corvis/Huber to put money into component companies. If components were readily available for some of the techniques being developed I'm sure the components would have been bought from the traditional vendors.
Reindeer 12/5/2012 | 12:44:26 AM
re: Corvis Makes More Cuts dave77777, why do you say "I see zweisel is still obsessed with me, but sadly for him I don't care." when you send him comments and he/she has not even posted. Anyone home?
happy_go_lucky 12/5/2012 | 12:44:24 AM
re: Corvis Makes More Cuts Does anyone know if Corvis was eliminated from the AT&T Long Haul Contract, thus causing them to prep for more cuts. The rumors are that the three finalists were Ciena, Corvis and Lucent (Primarily for Historical reasons)? They had the more interesting technological solution out of the three.
doc21 12/5/2012 | 12:44:24 AM
re: Corvis Makes More Cuts I tried calling Luxn today and no one was home have they shut there doors already? Any news?
dave77777 12/5/2012 | 12:44:17 AM
re: Corvis Makes More Cuts happy -
The most credible rumor I've heard is that T decided on a new round of testing for Q1 with all three. Given what T execs said at a recent conference, it sounds like they would prefer to have some products from each company, rather than everything from one. Corvis does have the more interesting core transport and switching products, but the edge (OCS) is unproven. I would imagine they want CD from Ciena for that, and that they're trying to work LU in somewhere for old times' sake.
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