AFC forecasts growth for 2004; market dives for cover

Despite predicting revenue growth of more than 10% this year and confirming a multiyear agreement with Verizon, Advanced Fibre Communications saw its stock plunge on the morning after it announced fourth quarter and full year 2003 revenue that was off compared to previous periods.

Revenue for the fourth quarter of 2003 was $84.8 million compared with $85.2 million in the third quarter of 2003 and $85.7 million in the fourth quarter of 2002. Net income for the fourth quarter was $5.7 million, or 6 cents per share, compared with $9.3 million, or 11 cents per share, in the third quarter of 2003 and $17.6 million, or 21 cents per share in the fourth quarter of 2002.

On the year, the company reported $333.5 million, compared with $344.1 million for fiscal year 2002. Net income also dipped in 2003 to $26.7 million compared with $31.8 million in 2002.

Perhaps most important from a revenue perspective in the quarter was confirmation that the company has signed a long-term deal to provide Verizon with CO-based fiber-to-the-premises gear. Previously, the company had announced that it was in lab trials with the RBOC. However, during the quarter, Verizon entered into an agreement that extends its prior contract out to 2008, said John Schofield, chairman, president and CEO of AFC.

The telco expects to begin field trials with AFC’s FiberDirect platform in the spring and expand to 100 central offices in nine states throughout the year. The Verizon contract, along with continued sales from SBC Communications, Alltel and Sprint, should give the company a good growth pattern this year, Schofield said.

"We’ll be able to deliver top line growth in the low double digits," he told analysts.

However, the company is projecting first quarter revenue to decline to between $81 and $84 million because of seasonality. Activity should pick up in the second and third quarter as telcos in the northern half of the country ramp up construction projects, Schofield said.

"I would say that in North America at least, we saw encouraging signs for the business that suggest the worst days for this industry are behind us," he said.

This week, the company also unveiled a new marketing campaign focused on increasing its share of the telco video market.