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Company restructures and looks more like a service provider than ever before
September 17, 2003
Corvis Corp. (Nasdaq: CORV) has restructured its businesses in an effort to save cash and reach profitability, the company said Wednesday. And, in the process of remaking itself, Corvis leaves the impression it will focus more on its service provider business going forward.
"We've decided to further adjust the business and integrate the business and, in doing so, we will realize an annual cost savings of between $30 million and $40 million once all this is done," says Andy Backman, VP of investor and public relations for Corvis. Backman says the restructuring should be complete by the end of this year.
The company says it will cut about 200 jobs in the process, taking its headcount down to about 1,200. The cuts will save the company about $7 million to $10 million a quarter in operational expenses, Corvis's CFO Lynn Anderson said in a prepared statement.
The move wasn't at all surprising, given that the company is still digesting the acquisition of its service provider subsidiary, Broadwing Inc. (NYSE: BRW). Indeed, sources have recently indicated that CFO Anderson was spending a considerable amount of time in Texas, working on Broadwing's books (see Headcount: Buddy Can You Share a Line?).
The cuts are almost exclusively on the equipment side, leaving fewer than 100 people at the original Corvis business, according to Smith Barney analyst Alex Henderson.
The timing of the restructuring is interesting, though, given reports last week that Corvis was not among the winners selected by the government for its Global Information Grid Bandwidth Expansion project (see GIG-BE Winners Named). "Given its lack of success in GIG-BE, we believe the company has decided to go into 'hibernation' on the equipment side and focus on running Broadwing," Henderson wrote in a note to clients today.
Besides cutting jobs, Corvis will take a charge against earnings in both the third and fourth quarters of 2003. It expects to end fiscal 2003 with about $275 million to $300 million in cash and investments and to become profitable by the middle of next year.
The company will discuss additional restructuring details on its October 30 quarterly earnings conference call.
In fact, the company has undergone quite a transformation in the past few months. Here's a recap of the wild action since June:
June 13: Corvis forms C III, a joint venture of Corvis and Cequel III, a venture capital company; and then C III completes the purchase of Broadwing Communications, one of Corvis's customers, from Cincinnati Bell (see Corvis Completes Broadwing Acquisition).
July 29: Corvis becomes the only vendor to publicize that it was invited by Science Applications International Corp. (SAIC) to participate in the testing phase for the Optical Transport System (OTS) portion of the U.S. Defense Information Systems Agency's GIG-BE project (see Corvis Solo in Bake-Off Boast).
July 31: For its second fiscal quarter of 2003, Corvis reports $27.0 million in revenue and a net loss of $45.8 million, or $0.11 per share. The Broadwing subsidiary contributes $26.7 million of the company's $27 million in revenues, indicating that most of its business has shifted from equipment sales to services.
August 28: Corvis says it will raise more than $70 million in a private placement stock offering (see Corvis Looks to Sell More Stock and New Corvis Investors Unveiled). More than thirty institutional investors buy over 67 million shares of stock at $1.15 a share, giving the company about $73.2 million in new cash.
September 12: Light Reading reports that Corvis was not among the winners of DISA GIG-BE business. Corvis shares fall more than 25 percent on the news (see DISA Talk Bounces Stocks).
September 15: Corvis announces its return to the Nasdaq National Market System. In October 2002, Corvis transferred to the Nasdaq SmallCap Market as its common stock had not met Nasdaq’s $1 per share minimum bid price requirement for continued listing on the National Market (see Corvis Gets on Nasdaq National).
Today: Corvis shares jump $0.07 (4.83%) to $1.52 in early afternoon trading as the company announces it will further cut its costs and is striving to reach profitability by the middle of next year.
— Phil Harvey, Senior Editor, Light Reading
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