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Covad Beats Wall Street's Q3 Expectations

Covad beat market trends and analyst projections on Wall Street with its 200,000 digital subscriber line subscribers, it was announced Tuesday.

That puts Covad 30 percent above projections, due mainly to a combination of operations savvy and low expectations by Wall Street and market analysts of the popularity of DSL, according to Robert E. Knowling, Jr., Covad chairman, president and chief executive officer.

"Meeting this goal shows that Covad's fundamental are solid and we scaling our business as expected," Knowling said. "We have the largest, strongest independent business in the DSL market, demand continues to be high and our direct and indirect channels are selling our services well, creating record order months. Our back office is a machine cranking out installations and our marketing department is focused on selling value-added services to businesses. I am confident that we are on track to meet our targets for the quarter."

For a while, the announcement halted Covad's plummet in stock value, which fell below its 52-week low of 11.875 per share to 10.609 at press time. But by the end of the day on Tuesday, Covad closed down 2.09 or 18 percent to 9.91. It's a sign of Wall Street's trepidation in Covad's business model, which is rapid deployment to become first-to-market and acquiring subscribers on the fly.

Nick Kormeluk, Covad senior vice president of investor relations, said the CLECs operations capabilities is more than keeping up with network deployment, and that company's stock value will rebound.

"Our focus from the beginning is on operations and our ability to scale our operations to meet the network deployment," Kormeluk said. "That and our Operations Support System, which lets us support our customers without having to manually connect the subscriber to a DSL line."

"Our stock has been under pressure today, but the news today helped it rebound, bringing it up $1 per share after the subscriber numbers were released," Kormeluk said.