Avici slashes revenue forecast, cuts 55 staffers

Core router maker Avici Systems Inc. Monday lowered its third-quarter forecast and announced a 14 percent reduction in workforce due to lower-than-anticipated customer orders.

Avici is cutting 55 of its 392 employees, and expects revenue for the third quarter, which ends Sept. 30, to be US$9 million to $10 million, down from earlier estimates of $22.5 million to $23.5 million. The company said its customers are even more conservative in their spending than anticipated, and that orders from Enron Corp. and Williams Communications Group Inc. did not materialize at all.

In addition to those two carriers, Avici's customers also include AT&T Corp., Qwest Communications International Inc., France Telecom SA and the U.S. government.

Despite the downward forecast, the new revenue estimate still represents an increase of 93 percent over the $4.4 million recorded in the third quarter of 2000, Avici stated.

"We continue to believe the demand for IP services is strong," says Avici President Steve Kaufman. The company still has 12 lab and field trials underway for its Terabit Switch Router.

Avici will take one-time charges of between $15 million and $18 million in the third quarter. Included in those charges are estimated provisions for excess inventory and related commitments of approximately $14 million, asset utilization of $1.5 million, and severance- and facility-related costs of $1 million.

Pro-forma net loss is expected to be $0.40 to $0.42 per share, compared to a current First Call consensus estimate of $0.23 loss per share. Net loss per share, including non-cash stock-based compensation and the one-time charges, is expected to be $0.77 to $0.84. Pro-forma net loss per share and net loss per share for the third quarter of 2000 were $0.33 and $0.70, respectively.

Avici expects to be profitable in 2003. The company is will burn $40 million to $45 million in operational expenses in the fourth quarter and end the year with $140 million with which to run the company, which is sufficient to reach 2003, Avici officials say.

Avici will burn $20 million in the first quarter of 2002 but that rate will decline in subsequent quarters, company officials say.

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