Avici Systems, a maker of large routers for service providers, will cut 45 percent of its workforce and focus on a few core features in a bid to achieve a profit.
Layoffs and other cost-cutting will start immediately and continue over the next several months, the company announced last Thursday. Both full-time employees and contractors will be cut from a workforce that totaled about 300 at the end of last year, President and Chief Executive Officer William Leighton said on a conference call Thursday. A majority of those cuts would happen immediately, he said. As a result of the cost-cutting, Avici expects to see annual savings of about US$20 million in 2007, compared with its 2005 costs, the company said in a statement.
Cisco Systems and Juniper Networks dominate the market for core routers, where there is fierce competition to win over relatively few large service providers with high capacity, reliability and advanced features. Avici's main products are the Terabit Switch Router, Stackable Switch Router and the Quarter-rack Scalable Router.
For much of its revenue, Avici has relied on one customer: AT&T, which last year was acquired by SBC Communications, where Cisco is the main core router supplier. Avici's routers have also been deployed by China Telecommunications, France Telecom and other carriers, according to the company's Web site.
In the fourth quarter of 2005, Avici lost US$8.6 million on revenue of $6.1 million. For the full year 2005, it lost US$24.7 million, and in 2004 the company lost US$35.4 million.