Avici Out of Turk Telecom
Avici had been supplying its TSR routers to the carrier through a deal brokered by Alcatel (NYSE: ALA; Paris: CGEP:PA), the lead integrator for the carrier's IP/MPLS network rollout. (See Turk Selects Avici .)
Now, though, Avici says the supply agreement with Alcatel has been "terminated." The two companies will "unwind the financial arrangements and decommission the routing equipment," Avici said in a prepared statement.
The news sent the router vendor's stock down $0.39 (4.52%) to $8.23 in early morning trading on Friday.
It's not immediately known why Avici has been thrown out of the carrier's network. When the engagement was initially announced a year ago, the carrier's director of data networks, Yucel Bagriacik, was quoted as saying: "The Avici solution has demonstrated its ability to meet the demands of our next-generation network."
Avici had not yet reported any revenues from the Turk Telecom deal, but noted during its first quarter conference call in April that revenues were expected during 2006. (See Avici Soars on Q1 Numbers.)
Prudential Equity Group LLC analyst Inder Singh says he wasn't expecting much in the way of revenues from the Turk Telecom deal in 2007, but notes that "it's somewhat negative that Avici is being decommissioned. It doesn't really give them the Good Housekeeping Seal of Approval."
While Avici has been outperforming expectations this year, it can't afford to lose any customers. It is heavily reliant on business from AT&T Inc. (NYSE: T), and needs to expand its customer base, not see it retract. (See Avici Rocks 42% on Shock Profit.)
Executives from Avici and Turk Telecom couldn't be reached for comment. Alcatel could not immediately respond to questions about a replacement for Avici.
The obvious replacement would be either Cisco Systems Inc. (Nasdaq: CSCO) or Juniper Networks Inc. (NYSE: JNPR). Juniper is a close partner of Alcatel's bride-to-be, Lucent Technologies Inc. (NYSE: LU). There's also the possibility that Alcatel will try and persuade Turk Telecom that it has the router power to replace Avici. (See Alcatel Sticks to Core Plans and Rumor: Alcatel Craves the Core.)
Turk Telecom is undergoing a significant overhaul of its network and back office systems, and is planning to invest about $3.5 billion during the next six to seven years. — Ray Le Maistre, International News Editor, Light Reading