Q4 2005 Avici Systems, Inc. Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Welcome to the Avici fourth quarter earnings conference call. [OPERATOR INSTRUCTIONS] As a reminder this conference is being recorded. I would now like to turn the conference over to your host, Ms. Inna Vyadro. Please go ahead.

INNA VYADRO, DIRECTOR, IR, AVICI SYSTEMS, INC.: Thank you and good morning. Joining me are Bill Leighton, Avici's CEO, and Paul Brauneis, our CFO. Avici issued two press releases that were distributed at approximately 7:30 a.m. this morning by Business Wire and First Call. A copy of both announcements and the conference call are available at our website at www.avici.com.

I would like to remind you that during this call we may be making forward-looking statements including our plans and objectives for future operations including the restructuring we announced this morning, our expectations for product delivery, customer activity and financial performance. These forward-looking statements are neither promises nor guarantees but are subject to risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. Those risks and uncertainties are further described in our press releases and presented in detail in our Form 10-K as filed with the SEC.

Additionally during the call we will also discuss various non-GAAP financial measures. A reconciliation of non-GAAP financial measures is provided along with the financial tables in our earnings press release which as previously mentioned is available on our website. Our press releases were also furnished to the SEC on Form 8-K this morning. At this point I would like to turn the call over to Bill.

BILL LEIGHTON, CEO, AVICI SYSTEMS, INC.: Thanks, Inna. Good morning everyone, and thank you for joining us. This morning we issued two press releases. One addressing our earnings for Q4 and the full-year 2005, and the other announcing a change in strategic direction for the Company and related restructuring designed to lower costs and drive Avici to operational and cash flow break-even. I'll let Paul handle the financial portion of the call for the Q4 and 2005 financial results as well as the financial implications and expected results of our change in direction. Let me take a few minutes to describe the actions we are taking, what led us to make this decision, and its desired results.

This morning we announced a plan to reorganize our business and significantly realign its cost structure. We are executing on a plan that we believe will provide improved performance for both customers and shareholders. Near term, Avici is focused on driving rapidly to profitability and positive cash flow by more closely aligning its costs to its achievable revenue stream. While in parallel evaluating other strategic alternatives. We are working with Morgan Stanley and Bowen Advisors to assist us in the latter effort.

Post the telecom bubble we've seen industry consolidation in existing networks operating to nearly peak capacity rather than expanding rapidly in anticipation of growth. Carriers no longer have the resources necessary to take best in class component approaches to building their networks. Instead they seek a complete solution that can be delivered as part of an overall systems integration project. The new nature of the market has made direct sales in Europe and Asia impractical for us, and changes in strategic emphasis from wireline to wireless by distribution channels such as Nortel makes successful relationships with good margins less likely. This environment has historically required to us commit significant resources both in R&D and sales and marketing to address the depth and breadth of varying customer requirements around the world.

After thoroughly reviewing our business, during my tenure this past year, it's become apparent that the most promising course of action for a small router company such as Avici is to focus its product development on mainstream industry players that have compatible requirements and eliminate the resource consumption associated with trying to be all things to all potential customers in all potential places. Although we've had a degree of success with our single strategy initiated last year, gaining new customers and further validating our technology …