Advanced Fibre Communications ( AFCI) investors fretted Wednesday that the company is losing its grip on a pivotal Verizon ( VZ) contract.
Shares of Advanced Fibre, a networking gearmaker, are off 11% this week on word that the company missed a key deadline in supplying Verizon's optical network buildout. The scuttlebutt is that the evaluation-stage snafu puts AFC rival Alcatel ( ALA) in position to wrest away the closely watched job. Though network equipment testing delays are commonplace, the stock's sharp pullback underscores Wall Street's high expectations for AFC as a primary supplier in Verizon's ballyhooed fiber rollout. Verizon's plan is to use fiber instead of the usual copper wire in all its new network expansion efforts. This so-called fiber-to-the-premises, or FTTP, program has captured investors' imagination by promising to reinvigorate a dormant fiber-optics market. As the nation's largest phone company and top equipment buyer, Verizon has helped whip up investor enthusiasm over several recent spending plans. Those include wireless data upgrades and a shift toward voice-over-Internet protocol and fiber to the home. But as observers point out, Verizon has a history of dragging its feet on new technologies -- take its late-to-the game performance on digital subscriber line, or DSL, Internet access -- and there's little reason to think that's suddenly changed. A source familiar with Verizon's plan says the commotion around AFC has been largely a clash of perceptions. While AFC has been tardy in meeting some of Verizon's requests, the vendor isn't in immediate danger of being dropped, says the source. But what's contributing to this uncertainty, the source says, is that Verizon plans to seek additional bidders this summer as secondary suppliers. Big telcos typically do so as a matter of course in big network projects. That's how Alcatel -- or some other player -- could start chipping away at some of AFC's business, say analysts.