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
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.
An AFC representative wasn't immediately available for comment. Verizon declined to comment on the speculation and said the contract hasn't changed.
AFC has a four-year contract to supply Verizon with equipment to operate the fiber cable from the telecom facility to the customer. But Verizon hasn't specified how much it will spend with AFC, saying only that its target is to string fiber past 1 million homes this year.
In a note to clients Wednesday, UBS analyst Nikos Theodosopoulos predicts that Verizon will fall short of that target. He says that 750,000 homes may be a more realistic number.
Shares of AFC fell $1.05, or 4%, to $22.03 in afternoon trading Wednesday.