More Trouble for AFC
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