Corvis's French Connection

Once again, Wall Street is buzzing with rumors that Corvis Corp. (Nasdaq: CORV) is on the verge of signing a contract with France Telecom SA (see Corvis Closing in on New Customers).

Sources say a deal is near -- but is it a case of too little, too late? The exact amount of the deal is unknown, but those close to the company say they expect it to be relatively small. And Wall Street certainly doesn't think much of the rumors: Corvis traded down 0.64 (12.67%) to an all-time low of 4.41.

Corvis said it could not comment on any rumored deals until one is announced.

“I think that the size of the contract will not be large,” says one Wall Street source, who didn’t want his name used. “But it may lead to more business with France Telecom in the future.”

Even a small deal is good news for Corvis at this point. On the company’s last conference call, David Huber, president and CEO, said he didn’t expect to announce any new wins until the end of the year (see Corvis: No New Customers). Without new contracts on the horizon, Corvis is relying on revenue from its three announced customers: Broadwing Communications Inc. (NYSE: BRW), Qwest Communications International Corp. (NYSE: Q), and Williams Communications Group (NYSE: WCG). But Broadwing’s network is almost complete, which leads investors to believe that further revenue opportunities are limited. Williams should continue to produce revenue in the second half of the year, but the provider has been struggling financially as of late. Qwest is the only announced deal with strong promise for the future. Back in April, the carrier expanded its $150 million two-year contract to include additional products from Corvis to build its optical express network (see Qwest to Build National Net With Corvis).

While the entire sector has taken a beating over the last several months, Corvis has been hit particularly hard, due in large part to the lack of new announced customers, say analysts.

At the CIBC World Markets investor conference in New York earlier this week, Andrew Backman, director of investor relations for Corvis, told a crowded room that the carriers are being much more careful with their money, and the lengthened sales cycle has hampered the company’s efforts to announce new customers.

“We find we have to go back at least three times to the same organization and give the same presentation to three different people at different levels,” he said.

A France Telecom deal would demonstrate at least one strong point for Corvis -- sources say it was going up against Alcatel SA (NYSE: ALA; Paris: CGEP:PA), one of France Telecom’s largest suppliers of equipment, in bidding for the business. In September of 2000, Alcatel announced that France Telecom agreed to deploy Alcatel’s DWDM gear in its 15,000-mile North American network (see France Telecom Tags Alcatel for N.A.).

“It’s never over until it’s over,” said one Wall Street skeptic, who follows the company. “Alcatel will do anything to prevent Corvis from getting a foot in the door.”

Competing against incumbent vendors has been a struggle for Corvis, Backman told investors at this week’s conference. While Nortel Networks Corp. (NYSE/Toronto: NT), Lucent Technologies Inc. (NYSE: LU), and Alcatel have charmed customers with vendor financing, Corvis says it has avoided that strategy altogether. Backman said the company calls in third parties to handle financing when closing deals. He also said the company has walked away from certain deals because an incumbent competitor offered a better financing package.

“Vendor financing was a great tool used by the incumbent players,” said Backman. “They’ve basically given away products to gain market share and it’s obvious that that can’t last forever.”

- Marguerite Reardon, Senior Editor, Light Reading

LightBeating 12/4/2012 | 8:14:41 PM
re: Corvis's French Connection Will we finally hear some good news from Corvis?

I must admit that, even though I'm a strong believer in that Company and their products, it's a tough ride for an investor, especially these last few days!

I'm also wondering what the hell their sales people are doing! It's been one year since they announced their last customer! We've been hearing rumors all over the place, but that just tells me that they've lost out on quite a few deals.

Hearing Andy Backman talk about "conversations" with potential customers makes me worried. I'd rather hear about "negotiations"! Do their people have the right skills to sell their products? Can't they find ways of getting around the vendor financing issue? Some creativity might help here, but it's not clear whether they've got any! I hope it's not a case of being so self-confident in their technology and their products that they would only make a deal under their own terms. This is a time to be accomodating to the customer, for heaven's sake!

I still believe in their product. I'm aware this may be the worst environment for systems vendors, probably the worst year ever! But surely they can get some little contract somewhere, just to reassure investors that they're not going down the drain!

David Huber, it's time to show that you can be a real CEO!

aaaaaaptics 12/4/2012 | 8:14:40 PM
re: Corvis's French Connection sounds to me that ALA feels threatened by CORV's premium product line. FT will bring more and more business to CORV when things in telecom recover. CORV's presence in europe better pay off.
why 12/4/2012 | 8:14:38 PM
re: Corvis's French Connection people are tired of hearing rumors of customers,
and getting disappointed. this is the reason
they trade lower than some companies that are in much worse shape. I would be much
happier if insiders simply kept quiet until
they really have a deal.
tokyoyoyo 12/4/2012 | 8:14:34 PM
re: Corvis's French Connection Someone, anyone, please explain why Huber is constantly selling shares of CORV at price levels that defy shareholder integrity?
figatree 12/4/2012 | 8:14:33 PM
re: Corvis's French Connection I agree with you tokyoyoyo. I was reading over the insider trading and he is selling like the prices are excellent. I do not get it. I do not think he needs the money. Someone was telling me maybe he knows something we don't.
LightBeating 12/4/2012 | 8:14:32 PM
re: Corvis's French Connection There's something weird about these sellings. However, they're indirect holdings, so probably he's not the one who's selling. It's either a trust, or family, etc.

This man is rich already from Ciena ($300M !...). He doesn't need the cash.

It would not be a bad idea to give some explanation to the other shareholders (including myself!).

This company is ours too, David, it's not just another ego trip!

Rugger 12/4/2012 | 8:12:49 PM
re: Corvis's French Connection Corvis Corrects Huber Holdings

COLUMBIA, Md. -- Corvis Corporation (NASDAQ:CORV - news) today issued a statement correcting erroneous news reports concerning the ownership of Corvis stock by Dr. David Huber, President and CEO. Dr. Huber continues to own 87.1 million shares of Corvis stock, not 7 million as incorrectly reported by several news services.

During the month of May 2001, Dr. Huber was correctly attributed with the sale of approximately 3.2 million shares of Corvis stock, or 3.5 percent of his holdings. These sales were made by a blind trust and an independent business entity in which he holds an interest. Dr. Huber had no ability to exercise any investment discretion or decision making authority in the execution of the trades made by either of these entities.

"Corvis is executing on the vision we established several years ago. We have delivered the industry's first all-optical network, which was recently deployed by Broadwing Communications," said Dr. Huber. "My confidence in the company has never been greater and we remain focused on executing our business strategy to deliver superior products and services to our customers."
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