Calix says CAF-II revenues are 'substitutive' as Q4 2015 earnings decline 6 percent to $105M

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Calix is anticipating that the Tier 1 and Tier 2 service providers that have accepted funds from the FCC's CAF-II program have started to see some spending activity amongst its largest customers as they begin network builds to bring broadband to rural areas of their footprints.

Speaking to investors during the fourth quarter earnings call, Carl Russo, CEO of Calix, said the company expects that CAF II spending patterns will be "substitutive" revenue, a trend that it saw previously with the FCC's broadband stimulus program.

"We see the effect of CAF-II as selling a floor underneath our customers' access market capex plans," Russo said. "We are reminded of the broadband stimulus program years ago that was expected to be additive. However, in retrospect, it was substitutive. This time it could be different. However, we have no indication that this is the case."

While it has not been able to reveal any specific numbers, the vendor has started to receive orders for its access gear for CAF II deployments throughout the fourth quarter.

"We are seeing all of our customers actually get up on their plans pretty quickly, the order flows are building," Russo said. "So I don't think it's going to be a wildly non-linear event, i.e. that all of it would be in next year and none of it this year. But I think some portion, less than 20 percent will be this year, and some portion, more than 20 percent, will be next year."

Besides CAF-II, Calix is keen on getting a piece of the service provider industry's movement to SDN and NFV.

In October 2015, Calix introduced AXOS, or Access eXtensible Operating System. AXOS is a Linux-based network operating system and software platform focused on the last-mile access network. Calix said that AXOS allows for "software defined access," where all software functions in the access network can be developed and run without relying on the underlying hardware and associated silicon chipsets.

It has implemented AXOS on its G.fast solutions as well as its E5-520, E5-308, and E5-306 MEF CE 2.0-certified systems. Calix plans to expand AXOS support for other E-Series systems at a future date.

"Over the past two years we have made deliberate and significant investments in R&D to position ourselves in front of what we believe could be the biggest shift power market will have ever seen, and that is the shift to software defined access," Russo said.

From an overall financial perspective, the picture was less rosy as Calix reported $105 million in fourth quarter 2015 revenues, down 6 percent year-over-year from the same period a year ago.

The company's net loss was $9.5 million, or 19 cents per basic and diluted share, compared to a net loss of $3 million, or 6 cents per basic and diluted share, for the fourth quarter of 2014.

Shares of Calix were trading at $6.25, down 99 cents, or 13.62 percent, in Wednesday morning trading on the New York Stock Exchange.  

For more:
- see the earnings release
- see this Seeking Alpha transcript (reg. req.)

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