Avici warns of Q3 revenue shortfall

Closely following the announcement of a five-year extension to its core networking contract with AT&T, Avici Systems warned that its revenue for the third quarter of 2004 will fall far short of expectations.

In a press release issued today, the core router maker said it expects its third quarter revenue to fall between $3 million and $4 million, a fraction of both the $12 million in revenue the company reported for the second quarter of 2004 and the $10.5 million it reported for the third quarter of 2003. As a result, the company does not expect to meet its goal of 20% to 30% annual revenue growth in 2004.

On average, analysts surveyed by Thomson First Call expected Avici to report $13.1 million in revenue for the third quarter and $48.25 million for the full year 2004. Avici reported $39.4 million in revenue for 2003.

Avici said the shortfall resulted from delays in anticipated network buildouts and the timing of expected orders.

Late last week, Avici announced that one of its biggest customers, AT&T, had extended a non-exclusive core networking equipment and services contract for five years. The original contract lasted from late 2000 to late 2003 and remained in effect since then because neither party terminated the relationship.

AT&T has long contributed more than 10% of Avici’s recurring revenue. Though Avici announced a partnership with Nortel Networks in January, an Avici spokeswoman said the extended contract would not involve Nortel since the original contract did not. And like the original contract, the extended contract does not require AT&T to make any purchases from Avici.

Avici will report its third-quarter earnings on Oct. 21.