Qwest Comes Through for Corvis

Corvis Corp. (Nasdaq: CORV) said Thursday evening that it has finally booked revenues from Qwest Communications International Inc. (NYSE: Q), more than two years after first making known that it had a contract with the Colorado-based carrier -- although the revenues coming from the deal are nowhere near what was originally promised.

The optical equipment vendor reported a total of $7.1 million in revenues for its fiscal fourth quarter ended December 28, down from the $15.2 million in revenues it reported during the year-ago period (see Corvis Reports $7.1M in Q4). Corvis booked most of its quarterly revenues from previous shipments to Qwest, but it also collected from Broadwing Inc. (NYSE: BRW) and France Telecom SA (NYSE: FTE).

The original contract between Qwest and Corvis, announced in June 2000, called for Qwest to purchase $150 million of gear in two years. Nothing happened for several months until, in February 2002, Qwest cancelled the then-reduced $110 million Corvis purchase order. What it gave Corvis instead was a contract for a minimum purchase of $12 million worth of Corvis gear over two years (see Corvis's Qwest Deal Reduced by $138M).

Qwest's purchases were from Corvis's ON product family, which includes its switch that's capable of transporting light for distances over 3,200 kilometers.

Though Corvis's revenues had fallen by more than half in one year's time, the company trounced Wall Street's expectations. Analysts expected Corvis to lose 11 cents a share on revenues of only $3.9 million.

The Qwest news wasn't the only bright spot in Corvis's earnings call Thursday evening. The company also revealed that it has shipped its first boxes to its fifth customer, the U.S. government, and it expects to recognize revenue from those shipments next quarter.

"What we're seeing now more than ever is that service providers are looking to reduce their total cost of ownership... [which] is Corvis's sweet spot," said David Huber, the company's CEO and chairman.

Huber also noted that the government's current list of upgrades and build-outs amounts to about $200 million to $400 million in business that Corvis's products could address over the next two years.

The outlook on the company's Optical Convergence Switch (OCS) and subsea product lines continues to be muddy. From the technical point of view, Corvis managers say they're satisfied with both product lines, but service providers just aren't opening their pocketbooks for its OCS and undersea transmission gear. "We don't know what the timing will be on any of these [awards]," Huber says.

Corvis's pro forma net loss for its fourth quarter was $46 million, or 11 cents a share, compared to the pro forma net loss of $39.9 million, or 11 cents a share, it reported for the fourth quarter of 2001.

With one-time charges add in, Corvis actually lost $190.2 million, or 47 cents a share, during the quarter, compared to the actual net loss of $374.8 million, or $1.05 a share, it reported during the year-ago period.

Corvis's revenues for fiscal year 2002 dropped to $20.2 million from $188.5 million during the prior fiscal year.

The company's actual net loss for fiscal 2002 was $507.8 million, or $1.30 a share, compared to a net loss of $1.4 billion, or $3.94 a share, during fiscal year 2001.

Corvis ended the quarter with about 833 employees. Because of the company's announced restructuring, it expects its headcount to fall to about 500 by the end of its first fiscal quarter of 2003 (see Corvis Makes More Cuts).

The company also ended 2002 with $504.4 million in cash and investments, down from the $548.7 million in cash and investments it reported in September 2002. Corvis says it burned about $30 million in cash during the quarter and will likely spend between $30 million and $35 million next quarter because of trial activity and restructuring charges.

However, Corvis maintains it will hit its goal of $25 million in quarterly cash burn by the third quarter of fiscal 2003.

The company expects revenues for its next quarter to be down sequentially.

— Phil Harvey, Senior Editor, Light Reading
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calpole 12/5/2012 | 12:41:33 AM
re: Qwest Comes Through for Corvis 2002: what are the products that are bringing some revenue??


What's about Sycamore SN series?
Tellium is dying
Any news of Ciena Core Director?

So , now we can see the future. OEO days
are gone..OEO is not only just 2-3 times
costly, it lacks other elegance..
Small size, low power consumption..

Farewell to OEO junks
ohub 12/5/2012 | 12:41:32 AM
re: Qwest Comes Through for Corvis Who knows? I still think OEO will be there for some time. OEO really has some advantages in network control and management and traffic grooming over tranparent optical networks. As a tradeoff, a translucent network should also has its stage when networks evolve from "opaque" to "transparent"
grapsfan 12/5/2012 | 12:41:32 AM
re: Qwest Comes Through for Corvis Whoa whoa whoa, calpole. Slow down a bit. Breathe deep.

1) Corvis is finally able to declare some revenue on equipment that they shipped many months ago. And without being harsh, Qwest reducing its need for the platform by over 90% doesn't instill confidence that the ON is the direction to go.
2) I don't think the Ray Express is an O-O-O box to compete with O-E-O cross-connects. I think it's just a DWDM box. The revenue that you're talking about (a 30-node deployment for a Japanese CSP) is probably less than $5 million.
3) Nortel's OPTera boxes aren't O-O-O switches either. They're DWDM nodes and ADMs. Their big connect machine, ConnectHDX, is O-E-O.
4) Sycamore just made a big announcement about upgraded feature capabilities on the SN16000. Whether or not that helps the product generate revenue, I don't know.
5) You're ignoring the O-E-O revenues:

- In their 2003 forecast, Ciena said they're anticipating about $100 million from CoreDirector.
- Tellabs 6500 is generating revenue from a couple of customers, with rumors of a couple more coming up (maybe)
- Nortel just made a ConnectHDX revenue announcement
- Lucent's LambdaUnite is generating revenues at DT (I think) and elsewhere

All of these numbers are bigger than the $5-6 million you're talking about with Corvis & Movaz.

Elegance is nice, but it's got to be manufacturable, deployable, and supportable by existing operations procedures. I'm not sure that's true.
ohub 12/5/2012 | 12:41:31 AM
re: Qwest Comes Through for Corvis All optical market has a long way to go. That is why Lucent removed their Lambda routers, Nortel also wrote off optical switches acquired from a start-up, and lots of MEMS switch vendors stopped their 3D boxes.

Optical Hub

zettabit 12/5/2012 | 12:41:30 AM
re: Qwest Comes Through for Corvis The comments by Huber in this earnings release are not only irresponsible, but I believe they show that he really does not understand the prospects out there for his company.

When one hears that "Huber also noted that the government's current list of upgrades and build-outs amounts to about $200 million to $400 million in business that Corvis's products could address over the next two years." one must be amazed that such form of mis-guided and poorly reasearched guidance is coming from a company facing more class-action law-suits than it has customers. Here are some facts:

This statement glosses over the fact that any government contract will be fought over very hard by Lucent, Ciena and probably Nortel as well, and much will be made by these players of Corvis' poor financial health and limited deployment experience. Given that what Huber is alluding to is the DISA project, there is NO WAY the Feds would award this to anybody that could not demonstrate iron-clad guarantees that they will be around in 3-4 years.

Also, Huber's upper end estimate of $400M of revenues is way out of whack given the prices Corvis is selling at today. Also, $400M from only the Federal government is unlikely when compared to the $277M of total commulative revenue accummulated over CORVIS' ENTIRE EXISTANCE, from deployments at Broadwing, Williams, Qwest, FT and Telefonica, at prices in 2000 and 2001 that were nearly 100% higher than they are today.

Finally there is the burn rate. Congratulations Dave, your burn rate from operations was only $40M in the last quarter, and your total cash balance down only $180M from a year agao. Great performance for a company with $20M of yearly revenues, selling at -75% gross margins (!!!) and with over 800 employees (that you only now are starting to realize may be a few too many).

LightReading has "guts of steel" to publish that "Though Corvis's revenues had fallen by more than half in one year's time, the company trounced Wall Street's expectations. Analysts expected Corvis to lose 11 cents a share on revenues of only $3.9 million."

I think anybody looking at this company from an objective viewpoint will realize that the only worse use for their money compared to buying Corvis shares would be to flush it down the toilet.

Finally, the greatest humour in all of this is that it appears that the only people actuallly buying Corvis stock appears to be....Corvis!

zettabit 12/5/2012 | 12:41:29 AM
re: Qwest Comes Through for Corvis You're right calpole, "all-optical" is winning and O-E-O is losing big-time.

That's why Innovance has had a product out for 9 months and zero customer traction.

That's why Nortel closed down XRos.

That's why Lucent closed down LambdaRouter.

That's why Calient is struggling to keep up with the billions in customer orders.

That's why Corvis is rejoicing at a $12M, 2-year PO from Qwest to get Huber off it's back instead of the original $200M order announced 2 years ago (great job there Vinod!).

That's why CoreDirector is the dominant grooming switch in the core networks of AT&T, Sprint, Qwest, Level 3, Williams and Cable&Wireless.

Please email me at [email protected] next time you post, so that I can rush to read your brilliant insights.
jimmy 12/5/2012 | 12:41:28 AM
re: Qwest Comes Through for Corvis To wiggle out of a $150M contract, Qwest agrees to buy ~$10M in Corvis gear. They must have hated to write the check to Corvis for their inferior gear. The fact that they bought the electrical switch is a real slap in the face for Corvis (the all optical company). Any bets when this stuff shows up on Ebay?
optical 12/5/2012 | 12:41:23 AM
re: Qwest Comes Through for Corvis Hey, don't knock Calient.... they're still in business and winning projects here and there. When the all-optical market hits in 2H04, they have a killer switch. Give these guys some credit
calpole 12/5/2012 | 12:41:21 AM
re: Qwest Comes Through for Corvis Well,
How much is Core Director? and stuff alike?
Come on, all optical can provide
same solution in $400K-$1M..

MEMS are dying..yes. Because MEMS based
OXCs are costly too....
But MEMS are not the only way you can do

Every service provider is installing OADMs.
The question is of OXC..

And just to remind..
XRos never worked ..
No new customer for CORE Director
in last 2 Qs
Lambda Router is no good innovation..should
go away..all optical can provide much better solution..
Don't think of the past..think future
..and don't think MEMS is the only
all optical solution..

Keep bulding OEO solution..till
you start realizing all optical magic..

Kumite 12/5/2012 | 12:41:20 AM
re: Qwest Comes Through for Corvis What r u smoking anyway?

Let's see, the two largest, most advanced optical companies in the WORLD (Lucent and Nortel) both stop development of OOO switching devices based on two different technologies. Is it that Lucent and Nortel are too stupid to make OOO work? Or maybe, if you knew anything at all, you might figure out that they know there are severe limitations in OOO networking that the world's largest customers are not willing to live with. So instead of spending money on marketing and manufacturing and lab trials of something that one, customers don't want due to market demand, and two, something that these same customers have made it pefectly clear has too many limitations to offset the advantages. So, Nortel and Lucent spend their money on R&D instead on fixing the issues with OOO today so that it will be a reliable reality in the future.

You people never cease to amaze me thinking that switching light is what OOO is all about. Here's an education for you [email protected]:
-- OOO switching is easy, pick a way: 2D MEMS, 3D MEMS, Liquid Crystal, FSO coupled with the aforementioned
-- The line amplifiers in use today (EDFAs) are one of the limiting factors in OOO. Ever hear of Gain Bounce where you add a number of optical carriers to an EDFA which causes a drop in the level of inversion in the Erbium ions that results in the gain to drop dramatically which then causes all traffic on the link, not just the new traffic to be effected
-- OSNR and LoL are not acceptable for customer SLAs
-- Switching lambdas can't be used for carrier grade protection because it is too slow (the switching of lambdas is fast, the acquisition and balancing of the signal is not)
-- Fault partioning a failed route in OOO is service disrupting

On GIG-BE. The government would have to be out of their darn minds to give a contract this size to a dwindling company with a WHOLE $7.1 million in revenue. Corvis is a dying company. The only man left standing at the end in Corvis will be Huber himself. He'll take the leftover money and sya "That was fun, where should I go retire."

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