Nov 4, 2005 2:50 PM,

Adva pledges dramatic U.S. investment

By Ed Gubbins

Fresh from its acquisition of Texas-based Ethernet equipment vendor Covaro Networks, Adva Optical Networking pledged an aggressive focus on the American market in its third-quarter earnings conference call Thursday.

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“You’re going to see dramatic money being invested [by Adva] in the United States,” Chief Executive Officer Brian Protiva said. “We’re investing to win. We’re not investing for profits today.”

The company’s third-quarter revenue was up 28% from a year earlier to 33.7 million euros, while net profit dropped 27% sequentially to 1.6 million euros. Research and development costs were up more than 25% from a year earlier to 3.95 million euros in the third quarter, and the company expects to spend even more--between 4.1 million and 4.3 million euros--in the fourth quarter as it adds engineers and develops new product features.

So far this year, about 15% of Adva’s revenue has come from the Americas (same as last year), though Adva expects to report a total of more than 22 million euros (about $26 million) from the Americas at year’s end, which would represent more than 17% of its total 2005 revenue.

Since Protiva moved to New Jersey from Germany last year, Adva’s U.S. workforce has grown by 8 to include 35 people--6% of its global workforce. Ninety percent of Adva’s workforce (487 people) is located in Europe, the source of more than 80% of its revenue. Adva’s U.S. workforce will roughly double as it absorbs about 40 of Covaro’s 50 employees, and the company expects to have 100 U.S. employees “fairly quickly.”

When asked by an analyst on the company’s earnings call about Adva’s efforts in Asia, where the company’s 22 workers contribute about 4% of its revenue, Protiva said that market would have to take a back seat while Adva focused on America, perhaps until at least 2007.

“Adva’s a small company,” he said. “We need to do one thing at a time. Building an Asia sales team is [currently] impossible. It’s going to take another couple years where we focus, focus, focus [on the U.S.]”