More Trouble for AFC

The soup is getting thicker for Advanced Fibre Communications Inc. (AFC) (Nasdaq: AFCI), as more analyst notes add to speculation about its status at Verizon Communications Inc. (NYSE: VZ), its life as an independent company, and the tenure of its chairman and CEO John Schofield.

The mixed bag of reports has, over the past three days, sent AFC’s shares down more than 11 percent. In trading on Wednesday, AFC shares had slipped $0.53 (2.30%) to $22.55.

Pacific Growth Equities Inc. analyst Joe Noel issued a note to clients today saying that a larger company had made an offer for AFC and that AFC turned it down. In addition, Noel hints that AFC isn’t done talking. “Our information also indicates additional suitors are involved, but it is unclear to us if further interest will materialize into an actual bid for the company,” Noel writes.

In January, Light Reading reported that Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) was trying to hammer out a deal to buy AFC (see Tellabs Angling for Access – and AFC). Noel is saying that activity put the company in play.

Noel also nudged a rumor that AFC CEO John Schofield is close to stepping down and moving on. “We believe a search for [Schofield’s] replacement has been ongoing, but at this time, we do not have information relating to the status of this search.”

Just yesterday, Noel reported that technical glitches in AFC’s fiber-to-the-premises (FTTP) platform were causing worry at Verizon -- enough worry that Alcatel had been asked to rebid for a portion of Verizon’s FTTP business (see AFC/Verizon Glitch Alleged).

UBS Investment Research analyst Nikos Theodosopoulos also says that AFC has had technical troubles of late. In a note sent to clients this morning, he writes that AFC “did not deliver FTTP equipment suitable for lab evaluation a few weeks ago...

“While this delay is not a major setback, we view software testing as a gating factor for AFC and the potential rollout of FTTP in '04."

Interestingly, Theodosopoulos counters Noel’s report that AFC’s contract has been rebid. “However, if software issues are discovered that take several months to fix, we believe there is a risk Verizon looks to bring other vendor(s) back into the mix,” he writes.

AFC did not respond to requests for comment on Wednesday.

Whatever the case with AFC’s technical health -- or its corporate strategy -- some are doubting Verizon will reach its stated goal of passing 1 million homes with fiber in 2004. “We believe the internal target now is closer to 700,000 to 800,000 homes to be passed in 2004,” Theodosopoulos writes.

— Phil Harvey, News Editor, Light Reading

gardner 12/5/2012 | 2:16:52 AM
re: More Trouble for AFC In light of the Light Reading story about Alcatel being asked to rebid on the contract that AFC won that makes the Tellabs bid for AFC interesting. If Tellabs were to purchase AFC that would pit former Alcatel USA CEO and current Tellabs CEO Krish Prabhu against his old employer. What a small world telecom is. ;-)
DCITDave 12/5/2012 | 2:16:40 AM
re: More Trouble for AFC This plot line courtesy of the WWE...
wap545 12/5/2012 | 2:16:15 AM
re: More Trouble for AFC "...analyst Nikos Theodosopoulos also says that AFC has had technical troubles of late".

Why is this comment so disturbing ??

How much credibility do we place in an INDUSTRY ANALYSTS who can say these things? WHose propaganda are these guys reading?? AFC and Verizon ? Why don't they go to a source, as in a Service providers evaluating the products and get their input?
Why doesn't Light Reading pick representatives of both RBOC, Independant and Rural Telco (Service Providers)and get qualified feedback-this is real world and of real value to all of us.

"...Technical problems of late-my derrier.
Did not deliver equipment suitable for lab eval..? The original RFP required the delivery of product to the Lab last September.

Come on Gentle people we need solid input here. The publishing field, especially in this Network Space is missing a real bet here. They need to look at real analysts.

optical Mike 12/5/2012 | 2:16:13 AM
re: More Trouble for AFC If Verizon was legitimately interested in deploying a BPON system in a timely manner they could have deployed www.OpticalSolutions.com FiberPath 400 system and if they had any foresight they would be deploying the FiberPath 500 GPON system, selecting AFC was a calculated decision
Y2KickIT 12/5/2012 | 2:13:36 AM
re: More Trouble for AFC I agree with optical Mike that selecting AFC allows Verizon to claim to be aggressive in rolling out FTTP, but have reason not to move as fast as claimed.

While Optical Solutions has a good product that has been deployed well in the U.S., big carriers don't buy from single product vendors.

That leaves Alcatel as the other vendor who has a real deployed product that meets the ITU defined PON FTTP system defined by the RFP.

OS might do better if it were acquired by one of the traditional vendors the ILECs play with, or maybe license its product to them.
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