Merrill on Corvis
>> Corvis (CORV; $7.89; D-3-2-9) Big Quarter – But What's Ahead? (M.
Ching 212-449-0187/S. Leopold 212-449-8748)
• Corvis put up strong sales of $84 million, well ahead of our $60 million
estimate. At first pass, one might be delighted with the
quarter, which included the completion of a major portion of the Broadwing
build-out and initial revenue from Williams. However,
lower gross margins and higher operating expenses offset the revenue
performance, leading to an operating loss per share of ($0.07),
consistent with expectations.
• We now expect 2001 sales of $314 million down from $320 mil and a loss
per share of ($0.25) adjusted from ($0.24). Our 2002
outlook now forecasts sales of $590 million down from $640 mil and a loss per
share of ($0.02) versus our previous estimate for EPS
of $0.03. We reiterate our Neutral intermediate term rating<<
8. AG Edwards on Corvis (just a few selected blurbs)
>>Capital spending was higher than we expected, but the balance sheet
remains in
good shape. Corvis burned about $147 million in cash during the quarter, but
exited with $877.8 million of cash and equivalents on the balance sheet. We
had not anticipated such a fast burn rate, but had not estimated such heavy
capital spending. Corvis invested $65 million in capital expenditures during
the quarter, but anticipates this rate will slow substantially in upcoming
quarters. Other uses of cash included an Accounts Receivable increase of
about $48 million, operating loss of $23 million and an inventory increase of
$12 million. Inventories remained relatively stable at $231.2 million versus
$219.4 million in the prior quarter, of which 65% represented raw material,
15% work in process and 20% finished goods. Days sales outstanding were at
68
days, but this figure may increase as customers are requesting more flexible
terms. Management estimates that the cash burn rate will slow in upcoming
quarters, estimating year-end cash to be about $650 million. At this rate,
the cash burn rate in upcoming quarters will average half the rate in the
first quarter. Corvis also has short-term credit facilities available to
provide additional flexibility. Fortunately, Corvis has a solid cash position from
its successful IPO, but we will keep a cautious eye on cash burn in
upcoming quarters.<<
>>Management sounded upbeat about the expanded Qwest relationship.
Corvis
announced that it is expanding its relationship with Qwest, as the carrier
will now purchase its CorWave ON optical switching and transport products,
in
addition to the CorWave LR high capacity dense wave division multiplexing
(DWDM) system. Management did not discuss financial specifics regarding
this
expanded relationship, but we view it as a positive since it offers the
opportunity to sell a broader base of products to Qwest, hence should
represent a more lucrative long-term opportunity. The Qwest deployment may
begin during the second quarter, but revenue will not start to be recognized
until the third quarter, when all three existing customers are expected to
contribute revenue.<<
>>A major European carrier has begun testing the new
CorWave XF product, but the product will not be generally available until the
second half of the year; hence we do not anticipate a contract before that
time.<<
>>Broadwing has activated its network using Corvis technology, but Corvis
cannot
rest on its laurels. Broadwing has successfully deployed Corvis' technology
for live traffic; hence investors can rest assured that it really works.<<
9. US Bancorp blurbs
>>Qwest To Deploy ON In Addition To LR. While we had expected a new
customer or two in the June quarter we were
encouraged by the announcement of trials with a European customer with the
XL product. We were even more encouraged with
the announcement of the deployment by Qwest of the CoreWave ON product
in addition to the LR product and as a result expect
to see and acceleration in the timing of revenue recognition from this customer.
We expect Corvis will begin shipping to Qwest
in the June quarter with revenue recognized in the 2H of 2001.<<
10. JP Morgan blurbs
>>Corvis' transparent switch (OS), the only commercially available product of
its type, is tracking ahead
of plan. This early traction speaks to the economic benefit of optical switching
for high-capacity signals,
the synergies between ultra long-haul transport and transparent switching, and
Corvis' ability to
commercialize difficult technology.
•Product initiatives--Corwave LR, XL/XF and STS-1 grooming
EdgeSwitch--should be instrumental in
broadening Corvis' revenue and customer base.
•Guidance implies new customers are imminent. We believe the Company is
very close to finalizing one
or two new customers, which should contribute to revenue in 2H:01.<<
>>Broadwing drove the quarter; Williams should ramp for Q2: Broadwing and
Williams accounted for
all of Corvis' revenue this quarter, with Broadwing providing the lion's share
($65.6M). Broadwing has
successfully installed five or six Optical Switches (OSs) and had built what we
believe to be the only live
mesh network using Corvis equipment. We believe the initial Broadwing
deployment will be complete by
the end of Q2:01, but this customer should still spend on line cards, OADMs,
and potentially more
switches. Additionally, we believe the Broadwing deployment should prove to
be a valuable reference,
helping Corvis to gain other customers. While the Corvis solution compares
favorably on a technical basis
to its competitors, we believe the lack of a long-standing track record at a
broad base of customers has
worked against Corvis during recent bake-offs. Williams began contributing to
revenue in Q1 ($18.5M for
accepted field trial equipment) after successful field trials in Q4, and we expect
this customer to constitute
a majority of Corvis' Q2 revenue.
Qwest expands scope of Corvis relationship; Switch tracking ahead of plan:
Qwest will expand the
scope of its previous contract with Corvis (Corwave OC-192 LR solution,
$150M over 24 months) to
include the CorWave OC-192 ON transport and switching products. Qwest
will use the ON and OS to
construct a high-capacity ultra long-haul mesh network, with the higher
density LR systems used as
"feeder" networks. Importantly, we believe this additional equipment will fall
under the original contract
and may not increase the size of the overall contract. Qwest and Corvis will
also work together to develop
OC-768 solutions, leveraging Corvis' strength in soliton and Raman
technology. We now believe Qwest
deployments are likely to begin in the current quarter (ahead of our previous
expectation), and revenue
should begin in Q3:01.
This new agreement represents an additional data point that Corvis' Optical
Switch (OS) is tracking ahead
of plan. This product is the market's only commercially available transparent
optical cross-connect, and
accounted for 30% of revenue in Q1, 50% of revenue in Q4:00, and 15% of
revenue in Q3:00 for a total of
>$50M - ahead of our model. While we believe that the OS, as a
first-generation transparent switch,
remains expensive on an absolute basis, this early traction speaks to the
economic benefit of optical
switching for high-capacity signals, the synergies between ultra long-haul
transport and transparent
switching, and Corvis' ability to commercialize difficult technology. We
believe Corvis' early experience
with this type of product bodes well for the Company's future success
developing its next generation OS,
and also selling this product into carrier networks. We should also mention
that we believe many of Corvis'
competitors, such as Lucent (LU, $10.54, LTB) and Nortel (NT, $14.42, B) are
having difficulty with
transparent switching technology.<<
>>Other new products (LR, XL/XF, EdgeSwitch) expand addressable market:
Corvis continues to apply
its core technologies (e.g., Raman amplification, soliton transmission, forward
error correction (FEC)) to
expand its addressable market. Toward this end, the Company recently
announced its ultra-high capacity
CorWave LR product, which uses leverages Raman amplification and soliton
technology over the C- and
L-bands to provide 3.2 Tbps capacity transport. This system can transport up
to 320 OC-192 (10Gb/s)
wavelengths for up to 800km or 160 OC-192 wavelengths up to 2,000km. The
LR is the first product from
the Algety acquisition and complements Corvis' two other product families,
CorWave ON and CorWave XL/XF. Corvis is also far along on the
development of its EdgeSwitch (from the Baylight acquisition), a
high-capacity STS-1 granularity opaque switch that will compete directly with
Ciena's CoreDirector and
Nortel's HDX. We are anticipating news about alpha trials in Q4:01.<<
>>Guidance implies new customer additions are imminent: Possibly the most
encouraging element of the
conference call was the implication that new customer additions are imminent.
Management stated that
most of this year's expected revenue (65-70%) is attributable to current
customers. The long selling cycle
for Corvis' system (which includes initial selling and negotiation, lab trials,
field trials, customer
acceptance, and finally revenue recognition), combined with management's
expectation for contribution
from new customers in 2H:01, strongly implies that Corvis is far down the road
with one or more new
deals.<<
boards.fool.com
While the analyst community may not be bright enough to see it (nor did
Corvis do a real good job announcing it) Qwest is a new customer.
The original contract with Qwest was for Corvis Algety OC-768 product. This
was a development contract that created revenue in late 2001/02.
The announcement for the Qwest All-Optical Network is for Corvis AON
products - The same products going into the Broadwing and Williams
networks. This is a National Overbuild of the Nortel 1600LH product line.
Therefore, be down on Corvis if you want, but this company will be very
successful overbuilding legacy networks built with Nortel and Lucent gear.Mark my
words - Xcited01 <<
3. lightreading.com
>>I often wonder who comes on these boards. I expect to see savvy long term
Investors and Daytraders. More often its people who are so pessimistic, I
wonder how they can trade.
Xcited01 is giving people some good advice, The smart money will listen to
him. Not only is Qwest a GREAT customer, but almost every stupid ass
analyst did not realize that Qwest expanded their contract with Corvis at the
same time they took over a large portion of the Microsoft Network's MSN
business in at least 14 states. Word on the street is that the CORV technology
was what Joe Naccio (CEO, Qwest) sold MS with. Qwest, MSN and Corvis
are probably up to more then they announced too. This is the cream of the crop
in customers. If you noticed ALL of CORV customers are solid financialy.
At $6.48 CORV still has $3.50 in cash on hand. Their technology is going to
have less competition, because IPO's are not coming back in 2001. CORV is
barely moved in to its new facilities and their aquisitions are not in full
production. What CORV is doing is using this downturn to become a force
majure when the tech bell goes off again. CORV did not put the Oil Barrons in
the White House. Until they get their way to go pump Texas-T in Alaska...
Tech is their prisoner of war. Gas heading for 3 bucks a gallon is still the fear
EVERY American and business is living with.
Xcited01 is right to note that CORV did a poor job of announcing their
progress. Watch out, I think that is done with a purpose. CORV is loathe to tip
off their competitors. Lowball system pricing will hurt Corvis in the short run.
However, sooner or later it will bite the sellers and buyers of it in the butt.
They will not make enough profit and the buyers will be stuck with antiques.
Anyone who would be selling their CORV shares now due the bullcrap
downgrades heard today is making a big mistake. Anyone who has the cash
should be buying. For a long term Investor $10k on CORV Monday, will buy
you a house in less then 24 months. And you can mark my words too.
Sparxe Nj<<
Qwest to Build National Net With Corvis
--------------------------------------------------------------------------------
COLUMBIA, Md. -- Corvis Corporation (NASDAQ: CORV - message board),
the only company delivering intelligent all-optical networking solutions, today
announced that Qwest Communications International Inc. will deploy Corvis'
CorWave ON product suite in the development of a nationwide all-optical
express network. Expanding the product scope of its previously announced
contract with Qwest, Corvis will now provide its CorWave ON all-optical
transmission and switching products in addition to the CorWave LR ultra-high
capacity dense wavelength division multiplexing (DWDM) system.
“Corvis' new technology will help Qwest move its data-intensive,
distance-independent traffic to an all-optical express layer,” said Mike Perusse,
Qwest's senior vice president of engineering and technology. “This will allow
us to eliminate electronic conversions in the network and drive down costs.”
Qwest and Corvis will also work together to develop OC-768 next-generation
transmission technologies. This R&D partnership will leverage Corvis' lead in
40-Gbps soliton transmission and Raman amplification products with Qwest's
commitment to next-generation new product introductions.
Corvis Corp. <<
5. Briefing.com on Sagawa report tomorrow
>>>>14:57 ET Telecom Equipment : Bernstein analyst Paul Segawa, who
made a name for himself by downgrading NT and CSCO before the plunge,
will be hosting a conference call tomorrow at 10 ET to discuss telecom capex
plans. Sources at Bernstein tell us that Segawa was quite negative in a note
today: he now sees No American capex down 20% in 2001 and down another
5+% in 2002. Sees NT as most exposed, CSCO turning around in 2002 due to
improved enterprise spending, LU as a value play. Likes wireless sector better,
favoring NOK but not ERICY and MOT. Already seeing pressure on telecom
equip stocks this afternoon, and could see more as traders anticipate a negative
take from an influential analyst.<<
6. notes I took from last Sagawa report from September 2000
>>>>Sanford Bernstein on Telecoms 9/28/00
--------------------------------------------------------------------------------
Bernstein Research Call
Telecom Equipment and Networking
Notes
September 28, 2000
recent study of likely carrier capital spending plans suggests that growth in
sales of telecommunications equipment will decelerate from better than 28 %
in 2000, to less than 20 % in 2001. The effects of deceleration will be felt in all
categories of spending, including the high growth optical, data and wireless
sector.
reducing our FY01 sales projection for Lucent from $43B to $40.8B, a 17 %
growth from FY00.
believes companies that have already been beaten up (LU, MOT, COMS) and
companies that focus on consumer devices that do not depend on carrier
spending represent the best harbors in what could be a harsh communications
equipment market.
analyzed 59 North American and European Telecom carriers. Concluded that
actual spending on telecom equipment is likely to show a sharp deceleration
from more than 28 % growth in 2000 to less than 20 % growth in 2001. While
carriers have historically underestimated their eventual capex requirements
and equipment is increasing as a % of total capital spending, they do not
believe these factors are sufficient to explain away the threat represented by
carrier plans to reduce total spending in 2001.
Carrier surveys completed one year ago reported expected US spending
growth of about 8 %, considerably short of projected 36 % 2000 growth.
Survey results in a 9 % decline in US spending , it is a stretch to assume that
the spending growth rate will not show considerable deceleration. The carrier
industry environment, marked by deteriorating financial performance,
bankruptcies, falling share prices, rumored consolidation and increasing costs
of capital, is not conducive to the aggressive upward spending revisions
observed in the last 3 years.
decelerating spending will affect all major equipment categories, including
optical and data networking. They believe 2001 spending on optical and data
will decelerate to 389 % growth, still very strong but considerably below the
2000 peak of 65 % growth.
concerned that companies trading at prices more than 50 times forward
earnings will face considerable pressure in an environment of decelerating
sales.
A deceleration of this magnitude would have serious implications for telecom
equipment stocks trading at multiples more than double their growth rate on
the assumption of top-line acceleration.
capex spending is extraordinarily out of line with revenue growth and cash
generation. Carrier market conditions, which contributed to the huge increase
in actual spending vs expectations have deteriorated (IE GST and ICG) . Free
cash flows have turned sharply negative - only 4 of 41 US carriers show cash
flow positive during first half of 2000. Bond yields are up, scrutiny on balance
sheets of borrowers has increased and made it more difficult for financing.
sees trend of more carrier bankruptcies and unfriendly industry consolidation.
While 19 % spending growth is above historical averages, the 900bp industry
deceleration would make it difficult for any sizeable competitor to deliver on
expectations of accelerating or even sustaining their 2000 top-line growth rate.
they do not believe optical equipment or data networking gear will be immune
from the deceleration effect, despite telecom priority in spending plans.
Reduced capex will have to occur for any type of afford ability.
spending growth on optical equipment and data networking will fall from more
than 60 % in 2000 to less than 40 % in 2001.
demand for voice services is growing and providing much needed profits,
making it unlikely that the industry will cut spending on traditional switching
significantly more than the 9 % decline assumed in the industry model.
Therefore, they disagree that cuts will only affect voice sector. <<
QWEST BACKBONE! THIS IS WHAT CORV GOT
boardwatch.com
VERY LARGE FOOTPRINT WITH BIG FATT PIPES IDEAL FOR
CORVIS BUILDOUT!
boardwatch.com
boardwatch.com
boardwatch.com
boardwatch.com
boardwatch.com
look at dem pipes again
boardwatch.com
Add it up:
This Map: qwest.com
These 3 conferences:
opticalworldcongress.com
cwmexpo.com
cc.uk.com
qwest.com |
