Crunch Time at Avici?
The firm announced a pro forma net loss of $11.8 million, or 24 cents per share, on revenues of $15.7 million for the quarter. Revenues are up 78 percent sequentially and 100 percent over the same quarter last year, whereas losses declined from $13.8 million during the same period last year. Avici's entire sales for 2000 were $15.9 million.
Citing costs required to ramp up the company's scaleable core routers, executives told analysts this morning to expect a similar net loss per share of 20 to 24 cents next quarter, on revenues of $18 million to $19 million.
The company's burn rate is about $30 million per quarter, executives say. And present cash, securities, and investments are $214.3 million.
Analysts say Avici is approaching crunch time, when it needs to land some key new customer accounts to demonstrate it can make it to profitability. "R&D and expenses are at a run rate designed for a higher set of revenues," says analyst Nikos Theodosopoulos of UBS Warburg.
That's why analysts on this morning's conference call grilled Avici about just how it expects to start earning more money. The company is still relying on just three carriers for about 85 percent of its revenues -- AT&T Corp. (NYSE: T), Enron Broadband Services Inc., and Qwest Communications International Corp. (NYSE: Q). And of these, just one -- AT&T -- is actually using Avici routers in its live network. The others are in trials, meaning they've committed to Avici and bought its routers but haven't put them onto their commercial networks.
Avici claims it has at least seven more customers in the pipeline, including Williams Communications Group (NYSE: WCG). But in many instances, the carriers require a lengthy evaluation process of nine months to more than a year before signing on the dotted line. That cycle is being stretched out even more with carriers' current cost constraints. Indeed, Avici is stuck right now with $10 million to $11 million in deferred revenue.
Avici claims sales have been boosted by its ability to add port density, adapt to gigabit Ethernet, and scale to OC192c (10 Gbit/s) in its routers without having to replace the main chassis. Company execs contend that routers from Cisco Systems Inc. (Nasdaq: CSCO) and Juniper Networks Inc. (Nasdaq: JNPR) are often pushed to the network edge once Avici takes over the core.
But the high-speed routing company is still only a blip on the screen of Juniper and Cisco. Research firm The Dell'Oro Group has estimated that Avici held one percent of the core router market in the fourth quarter of 2000 (see Report: Juniper Still Gaining On Cisco).
Avici officials point to improvements in gross margins ($6.7 million for the quarter, up 23 percent from the preceding quarter) and net losses (down about 6 percent sequentially) as evidence that it's progressing on plan.
At midmorning, Avici shares were trading at 14.30, unchanged from yesterday's level.
- Mary Jander, Senior Editor, Light Reading http://www.lightreading.com