Light Reading

Ciena's Smith: Revenue Dip Short-Term

Carol Wilson
9/4/2014
50%
50%

Even as Wall Street is knocking Ciena's stock around today -- it was down 8% today, based on its projections of lower earnings in the fourth quarter -- Ciena CEO Gary Smith remains cool, confident and focused. In an interview with Light Reading, Smith attributes the fourth-quarter revenue woes to the specific structuring of one contract -- AT&T's -- and says this uncertainty shall pass quickly. (See Ciena Ramps in Q3, Dampens Q4 Expectations.)

In fact, Ciena Corp. (NYSE: CIEN) is poised to do very well in the coming era of software-controlled networks and has a new balance to its balance sheet, based on customer diversity, to get the company through any rough times during the coming transition to SDN and NFV, Smith says. (See Optical Vendors Optimistic Despite Shrinking Market.)

"We have been focused on the convergence between optical and packet, and also on driving a more software-driven architecture for some time now," he comments, dating the change back to when Ciena acquired Nortel's optical assets. "Yes, that includes SDN and the various applications that help an on-demand-type network. But this is not an epiphany of the last year or so, it is a very deliverable strategy that we have been talking about for the last four or five years.

Responding to repeated questions from analysts on the earning call, Smith says the soft fourth-quarter projections relate to "disproportionate effects as a result of the way the AT&T Inc. (NYSE: T) deal came together," which will go away by the middle of 2015. (See What's With AT&T's Capex Dip?)

In the interview, Smith called the current network transition "very different, in terms of scope and scale" than previous transitions he has seen -- and there have been many in his 17-year tenure at Ciena.

"You are talking about a very large-scale shift at how people build networks. It's not trivial, not going to happen overnight," he says. "This is a fundamental change in the architecture and also the business model, to create a truly on-demand network, with a different set of dynamics."

While previous transitions often focused on step changes in the capacity of networks, this one isn't about moving bits around faster or moving more bits, he notes, and Ciena has been positioning itself for this change, with 70% of its engineering talent being software-focused.

"It's about evolving from a company that not just moves bits from A to B, but actually does something with them," Smith says. "That is where the value is moving forward."

Given the scope of the transition, there are likely to be other hiccups, as large telecom players try to get their strategies right. Smith argues that Ciena's business won't be seriously harmed by such issues, as it might have been in the past, because the company has diversified its business significantly in recent years, and no longer derives more than 20% of its revenue from any one customer -- even one as big as AT&T.

"We have a much more diversified business: We are the number one player in packet-optical, and we do business with many of the large carriers, but 30% of our revenue comes from non-carrier infrastructure," he says. "We have 1,000 customers, with geographic diversity, customer diversity and market diversity. And even within the large carriers, we have application diversity as well." (See Ciena Stirs Up the Metro Market.)

By staying true to its packet-optical focus and not trying to be an end-to-end supplier, Ciena will be able to play with a broad range of companies in the coming transition, and will capitalize on that strength, Smith maintains. However, he does see the partnership with Ericsson as a key advantage for getting Ciena an entry point into markets where it doesn't currently play strongly, including the mobile world. (See SDN at Heart of Telstra-Ericsson Deal and Ericsson's Ciena Tieup: It's a Migration Thing.)

— Carol Wilson, Editor-at-Large, Light Reading

(4)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Carol Wilson
50%
50%
Carol Wilson,
User Rank: Blogger
9/5/2014 | 2:16:10 PM
Re: Ciena with Ericsson
There is the Telstra contract. 
mfaisalk
50%
50%
mfaisalk,
User Rank: Lightning
9/5/2014 | 2:14:56 PM
Ciena with Ericsson
Yet to see concrete developments out of their relationship.
Carol Wilson
100%
0%
Carol Wilson,
User Rank: Blogger
9/4/2014 | 7:14:07 PM
Re: Ciena knows better than to rely on Ma Bell...
Based on what Smith says, they are not depending on any one customer going forward - too risky. That said, there will be customers who are major forces in the SDN/NFV world and Ciena or any other vendor may find its future hitched to one of these, at least in the short term. 

But that's a regular risk of the business. 
mhhf1ve
50%
50%
mhhf1ve,
User Rank: Light Sabre
9/4/2014 | 6:18:40 PM
Ciena knows better than to rely on Ma Bell...
Ciena has been around long enough to know that AT&T isn't really its best customer. Ma Bell has pulled the rug from under Ciena before, so I'm sure Ciena has learned to diversify its products and customer base to avoid being too dependent on any single telco.
Flash Poll
From The Founder
Last week I dropped in on "Hotlanta," Georgia to moderate Light Reading's inaugural DroneComm conference – a unique colloquium investigating the potential for drone communications to disrupt the world's telecom ecosystem. As you will see, it was a day of exploration and epiphany...
Between the CEOs
Affirmed Networks CEO: Digging Into NFV

5|28|15   |   40:26   |   (2) comments


Hassan Ahmed, CEO of Affirmed Networks, is making some big claims for his NFV startup. I sat down with him at the Light Reading HQ in New York City to get the skinny on what this Acton, Mass.-based startup is up to.
LRTV Documentaries
Cable Eyeing SDN for Headend, Home Uses

5|26|15   |   05:57   |   (1) comment


CableLabs is looking at virtualizing CMTS and CCAP devices in the headend, as well as in-home devices, says CableLabs' Karthik Sundaresan.
LRTV Documentaries
Verizon's Emmons: SDN Key to Cost-Effective Scaling

5|22|15   |   03:53   |   (0) comments


For Verizon and other network operators to ramp up available bandwidth cost effectively, they need to move to SDN and agree on how to do that.
LRTV Documentaries
Lack of Universal SDN a Challenge

5|21|15   |   04:51   |   (3) comments


Heavy Reading Analyst Sterling Perrin talks about how uncertainty about SDN standards and approaches may be slowing deployment.
LRTV Custom TV
Steve Vogelsang Interview: Carrier SDN

5|20|15   |   05:02   |   (0) comments


Sterling Perrin speaks to Steve Vogelsang, Alcatel-Lucent CTO for IP Routing & Transport business, about the new Carrier SDN-enabling Network Services Platform and the operator challenges it solves.
LRTV Custom TV
Carrier SDN: On-Demand Networks for an On-Demand World

5|20|15   |   20:52   |   (0) comments


Steve Vogelsang, Alcatel-Lucent CTO for IP Routing & Transport business, talks about requirements and benefits of Carrier SDN during the keynote address at the Light Reading Carrier SDN event May 2015.
LRTV Documentaries
The Security Challenge of SDN

5|19|15   |   02:52   |   (0) comments


CenturyLink VP James Feger discusses concerns that virtualization could create new vulnerabilities unless network operators build in safeguards.
LRTV Custom TV
NFV Elasticity – Highly Available VNF Scale-Out Architectures for the Mobile Edge

5|18|15   |   5:50   |   (0) comments


Peter Marek and Paul Stevens from Advantech Networks and Communications Group talk about their NFV Elasticity initiative and the company's latest platforms for deploying virtual network functions at the edge of the network. Packetarium XL and the new Versatile Server Module: 'designed to reach parts of the network that other servers cannot reach.'
LRTV Huawei Video Resource Center
Bay Area Spark Meetup 2015

5|14|15   |   3:54   |   (0) comments


Developed in 2009, Apache Spark is a powerful open source processing engine built around speed, ease of use and sophisticated analytics. This spring, Huawei hosted a meetup for Spark developers and data scientists in Santa Clara, California. Light Reading spoke with organizers and attendees about Huawei's code contributions and long-term commitment to Spark.
LRTV Custom TV
The Transport SDN Buzz

5|12|15   |   06:01   |   (1) comment


Sterling Perrin, senior analyst at Heavy Reading, speaks with Peter Ashwood-Smith of Huawei and Guru Parulkar of ON.Lab about the evolution of transport SDN and the integration of technologies.
LRTV Custom TV
Next-Generation CCAP: Cisco cBR-8 Evolved CCAP

5|5|15   |   04:49   |   (0) comments


John Chapman, Cisco's CTO of Cable Access Business Unit and Cisco Fellow, explained the innovation design of Cisco's cBR-8, the industry's first Evolved CCAP, including DOCSIS 3.1 design from ground-up, distributed CCAP with Remote PHY and path to virtualization. Cisco's cBR-8 Evolved CCAP is the platform that will last through the transitions.
LRTV Custom TV
Meeting the Demands of Bandwidth & Service Group Growth

5|1|15   |   5:35   |   (0) comments


Jorge Salinger, Comcast's Vice President of Access Architecture, explains how DOCSIS 3.1 and multi-service CCAP can meet the demands of the bandwidth and service group growth.
Upcoming Live Events
June 8, 2015, Chicago, IL
June 9, 2015, Chicago, IL
June 9-10, 2015, Chicago, IL
June 10, 2015, Chicago, IL
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
October 6, 2015, The Westin Peachtree Plaza, Atlanta, GA
October 6, 2015, Westin Peachtree Plaza, Atlanta, GA
All Upcoming Live Events
Infographics
Procera has gathered facts, stats and customer experience feedback from a survey of 540 users from across the globe.
Hot Topics
Charter Seals Deals for TWC, Bright House
Mari Silbey, Senior Editor, Cable/Video, 5/26/2015
Eurobites: Alcatel-Lucent Trials 400G in Czech Republic
Paul Rainford, Assistant Editor, Europe, 5/26/2015
Will Carriers Follow Facebook's Networking Lead?
Mitch Wagner, West Coast Bureau Chief, Light Reading, 5/28/2015
Charter Plans Business Services, Wireless Push
Alan Breznick, Cable/Video Practice Leader, 5/27/2015
Facebook Reinvents Data Center Networking
Mitch Wagner, West Coast Bureau Chief, Light Reading, 5/26/2015
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
On May 29th 1 PM ET, Steve Saunders, founder and CEO of Light Reading, will be drilling into the "pains and gains" of NFV with Saar Gillai, SVP & GM for NFV at Hewlett-Packard Co. (NYSE: HPQ) (HP). He has defined a four-step NFV model describing a sequence of technology innovation. It's a must-read doc for any network architect looking to get to grips with their NFV migration strategy. Join us for the interview, and the chance to ask Saar your NFV questions directly!
Hassan Ahmed, CEO of Affirmed Networks, is making some big claims for his NFV startup. I sat down with him at the Light Reading HQ in New York City to get the skinny on what this Acton, Mass.-based startup is up to.
Cats with Phones