APRIL 09, 2001
PREVIOUS NEWS ANALYSIS
Corvis Still Up-Beat
Despite Rocky Market
Following Sycamore Networks Inc.’s (Nasdaq: SCMR -
message board) earnings preannouncement, the industry
hit new levels of depression (see Sycamore Drops a Bomb
). It hardly seems like the right time for Corvis Corp.
(Nasdaq: CORV - message board), a Sycamore
competitor, to talk about expanding. But that’s exactly
what it’s doing.
Corvis, which just went public last summer, reported at
the end of the year that it employed over 1400 people.
And while Sycamore, Nortel Networks Corp.
(NYSE/Toronto: NT - message board), Cisco Systems Inc.
(Nasdaq: CSCO - message board), and Lucent
Technologies Inc. (NYSE: LU - message board) are all
laying off employees, Corvis is actually thinking about
expansion. The company is in talks with realtors in
Columbia, Md., to sign a lease for an 88,000 square-foot
property, according to a Washington Post reporter, who
earlier this week wrote a story saying that the company
had rejected plans to lease 100,000 square feet in the same
neighborhood.
Insanity -- or healthy growth?
The cancellation of the larger facility was confirmed by
Corvis officials, but they said that doesn't mean they're
scaling back.
"That doesn’t mean that we’ve curbed our expansion
plans," said the Corvis spokewoman. "We’re constantly
reviewing the needs of our business to meet our
objectives.”
Corvis could suffer from some of the same problems that
Sycamore is experiencing now. For one, both companies
have relied heavily on customers that have invested in
each of their IPOs. Sycamore has been riding the wave of
its preferred stock customers since it went public in 1999.
Williams Communications Group (NYSE: WCG - message
board), which was a pre-IPO investors in Sycamore, has
consistently been cited in its filings with the Securities and
Exchange Commission as one its biggest customers.
Like Sycamore, Corvis’s three announced customers to
date have all been investors in the company from before
the IPO. Williams, Qwest Communications International
Corp. (NYSE: Q - message board), and Broadwing
Communications (NYSE: BRW - message board) all
received pre-IPO shares in Corvis.
“What Corvis needs is a customer not affiliated with the
IPO,” says one hedge fund manager.
The proposed expansion may help solidify rumors that
Corvis has landed a big deal with a European carrier (see
Corvis Closing in on New Customers ).
"I think there is a high liklihood that they will be able to
announce a new customer soon after the quarter ends,"
says Seth Spalding, an analyst with Epoch Partners.
"Expanding their facilities might be a way of planning
optimistically for the future, but I don't know.”
But some analysts see Corvis’s expansion plans and
ramp-up in head count as a positive sign from the
company. “The fact that they are hiring and increasing
floor space shows they are on plan,” says one analyst,
who didn't want to be named. "I would say to look for
more customer wins and continued growth from them.”
Corvis has also been ramping up revenue lately. Last
quarter it announced $46 million in revenue on its latest
call. This is up from $22 million the previous quarter.
But this is still a far cry from Ciena Corp. (Nasdaq: CIEN -
message board), which has been one of the only optical
networking companies to report positive news in the last
quarter (see Ciena: What Slowdown? ). During its last
earnings call in February, the company reported $325
million in revenue and even raised its guidance. Currently,
it employs about 3,700 people worldwide.
“We’ve been hiring about 30 or 40 people a week,” says
a Ciena spokesperson. “I don’t see it slowing down
anytime soon.”
Whatever the outcome, it’s not hard to see that good news
could not come too soon for Corvis. The company’s stock
is hanging around $6 a share, down from a high of $108
back in July 2000.
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