<From Briefing.com> Cisco mentioned as possible buyer for Corvis
Live Headline 20-Oct-00 Corvis (CORV) 66 3/4 +7 9/64:
After a fall from grace in recent weeks along with the rest of the optical sector, Corvis is helping to lead the sector back today. Its Q3 earnings report last night marked its first report as a public company and its first report with actual revenues. A lot of revenues, as it turned out. The company was expected to post revenues in the $10-15 mln range, but reported $22.9 mln. The caveat is that all of these revenues were from one customer -- Broadwing (BRW) -- that had previously announced a 2-year, $200 mln deal with Corvis. Nevertheless, the quick ramp in sales to Broadwing reassured investors that Corvis' technology is for real. Its technology claims were always impressive, but seeing actual deployments of Corvis equipment makes these claims reality. Corvis has become the first company to deploy optical transport gear that can deliver an optical signal 4,000 km without regeneration. And it is the first company to deploy an all-optical switch. The transport system is perhaps the most impressive. Only Qtera, a recent Nortel (NT) acquisition, appears to be anywhere close to Corvis in this business. The 4,000 km distance without regeneration marks almost a tenfold improvement over current technologies. Regeneration requires an optical-electrical conversion, one of the most expensive pieces of the optical network. Corvis gear therefore promises huge cost-savings for trans-continental optical networks (the company claims that its equipment can producer about 75% capital savings for its customers). On the switching front, several companies have already shipped optical switches with electrical switching fabrics, including Ciena (CIEN), Sycamore (SCMR), and Tellium (filed for IPO), but Corvis is the first to market with an all-optical switch. Avoiding the electrical conversion makes the Corvis switch faster and more cost-effective, but the electro-optical switch vendors claim that it comes at the expense of service protection and restoration. Corvis naturally disputes that charge, and Broadwing's fast deployment does seem to be a vote of confidence. The company expects Williams Communications (WCG) to become its second paying customer this quarter, with its Qwest (Q) contract not paying dividends until the second half of next year. Revenues are expected to ramp to $300 mln next year, which is getting closer to the point where the $23 bln market cap is justified. But at this point, it is not only the promise of the company's all-optical lead that is producing the high valuation, Corvis also benefits from a takeover premium. Its lead in transport and switching has prompted much speculation that it will be a target. Cisco (CSCO) reportedly bid for the company prior to its IPO, and is still seen as a potential acquirer since it does not have the long haul transport gear, and its Monterey division is rolling out electo-optical switches, but not all-optical switches.
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