Avici warns on earnings, extends pact with AT&T

Core router maker Avici Systems this week warned that third-quarter revenue will be significantly lower than expected due to delays in anticipated network build-outs and timing of expected orders.

The company now expects gross revenues for its third quarter, ending September 30, will be US$3 million to US$4 million instead of the US$12.7 million forecasted by analysts. Revenue for the 2003 third quarter was US$10.5 million and US$12.1 million for the 2004 second quarter, ended June 30.

As a result, Avici said it does not expect to achieve its target of 20 percent to 30 percent annual revenue growth in 2004.

"We are clearly disappointed with this quarter's revenue level," said Avici President and CEO Steve Kaufman in a statement. "At the same time, we see our growth prospects strengthening in the coming year as a result of continued progress with our emerging channel business and new customer opportunities."

Carriers have cut back on purchases as they look to realign spending with revenue growth, Kaufman says. He expects spending to pick back up going into 2005.

"We're seeing more core routing RFPs now than in the past two years," he says.

Avici expects to report its third-quarter earnings on October 21.

Separately, AT&T has signed an extended purchase agreement with Avici for routers to converge multiple networks over an IP/MPLS backbone. AT&T, which has been buying routers from Avici since 2000, has extended its arrangement with the company for another five years.

Avici routers are currently deployed in 13 AT&T points of presence. Avici expects AT&T to deploy more Avici routers in additional PoPs to replace Cisco 12000 series routers and eventually populate every core PoP in the AT&T IP/MPLS backbone.

AT&T contributes at least 10 percent to Avici's quarterly revenue. Other Avici customers are Qwest Communications International, WilTel Communications Group and Huawei Technologies.

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