Avici stumbles on "neutral" call

Lehman Bros. took a bold step Tuesday and only gave Avici Systems Inc. (Nasdaq: AVCI) a "neutral" rating, while the company's other two underwriters rated it "outperform" and "buy."

Investment firms are known to issue bullish ratings on companies as they come out of their post-IPO quiet period, as part of the symbiotic relationship between underwriter and company.

Avici, which makes routers designed to move and manage massive amounts of information across fiber-optic networks, saw its stock tumble 11 1/4 to 130 3/4 following the news. Its shares flew out of the gate with 66 percent gains on its opening day, July 28.

"We believe Avici Systems remains well positioned to target the core of next generation networks with its highly scalable terabit switch router," analyst Mark Sue wrote in a report for Lehman Brothers, which co-managed the company's IPO. "While we are enthusiastic about Avici's prospects, we believe current share price levels may already reflect the impressive and open ended nature of the company's market opportunity."

Morgan Stanley Dean Witter, the company's lead underwriter, started Avici Systems as an "outperform" and set a 12-month price target of $155 on the stock.

"In our view, AVCI is a young company with excellent technology targeting high growth markets," analyst Alkesh Shah wrote in a research note. "AVCI's products address key challenges of next generation optical networks."

UBS Warburg, another co-manager for the offering, said analyst Nikos Theodosopoulos started Avici as a "buy."