Light Reading
CEO remains convinced Ciena is well-positioned for the software-centric network transition -- now if only Wall Street would calm down.

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
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
It's clear to me that the communications industry is divided into two types of people, and only one is living in the real world.
LRTV Interviews
From 4G to 5G: Alcatel-Lucent's Dave Geary

11|25|14   |   09:09   |   (1) comment


Dave Geary, President of Wireless at Alcatel-Lucent, talks about the evolution of the 4G market, small cells, partnerships, 5G and the IoT.
LRTV Huawei Video Resource Center
Building a Secure Telefonica Network With Huawei's High-End Firewall

11|24|14   |   4:37   |   (0) comments


Andrew Davies, IP architect of the Telefonica, a leading digital communications company, discusses the Huawei security gateway solution and putting the solution into the testbed.
LRTV Huawei Video Resource Center
Huawei Partners with Spirent to Verify CE12816's 10GE Port & TRILL Networking Capabilities

11|24|14   |   2:50   |   (0) comments


Spirent Communications is the world's leading supplier for telecom testing appliances and solutions. Spirent has been in a close partnership with Huawei for a long time.
LRTV Huawei Video Resource Center
Saudi Airlines & Its ICT Transformation

11|24|14   |   2:07   |   (0) comments


In this video, Saudi Airlines discusses its network problems and how Huawei's Agile Network is its all-in-one solution.
LRTV Huawei Video Resource Center
Huawei's Agile Switch Benefiting Saudi Arabia's Yamamah Hospital

11|24|14   |   2:40   |   (0) comments


Saudi Arabia's Yamamah Hospital speaks about how Huawei's Agile Switch has improved the medical service's network infrastructure.
LRTV Huawei Video Resource Center
FanPlay & Huawei Build a Wireless Agile Smart Stadium

11|24|14   |   2:13   |   (0) comments


FanPlay is a cloud-based white label service, which is effectively a football fan engagement platform underpinned by mobile payment technology.
LRTV Huawei Video Resource Center
Building an Agile Stadium

11|24|14   |   3:54   |   (0) comments


Stadiums may be thousands of tons of concrete and steel, but they now need to be agile. Being at the stadium may not be as alluring as it once was. Sports franchises and stadium operators discuss how to get fans back.
LRTV Huawei Video Resource Center
Huawei Helps ChinaCache Tackle Challenges in the Internet Industry

11|24|14   |   3:09   |   (0) comments


ChinaCache is China's largest content distribution network supplier. Huawei's CE12800 has provided ChinaCache with very strong support in its establishment of an infrastructure network.
LRTV Huawei Video Resource Center
Cefinity on Managed Security Services & Next-Generation Firewall

11|24|14   |   7:05   |   (0) comments


Cefinity is a cloud management service provider in Southeast Asia. Ivan Zhang, CEO of the company, discusses the implementation of security service management in the cloud era.
LRTV Huawei Video Resource Center
Huawei's Agile Gateway in the Eyes of Cefinity

11|24|14   |   2:11   |   (0) comments


Cefinity is a managed service provider for enterprise networks. The company currently uses Huawei's AR series routers for the most complete range of functions. CEO Ivan Zhang speaks about the advantages of the AR series routers.
LRTV Huawei Video Resource Center
CTO of Bus-Online Talks About Huawei's Agile Gateway

11|24|14   |   2:53   |   (0) comments


Bus-Online covers around 100 million users everyday. In addition to providing mobile TV, and advertising services to the public, Bus-Online has also entered the field of mobile Internet.
LRTV Huawei Video Resource Center
Amsterdam ArenA as an Agile Campus

11|24|14   |   3:31   |   (0) comments


The Amsterdam ArenA, home of the Ajax soccer team, can be a crowded space. ArenA has partnered with Huawei to work on bringing ample bandwidth to 53,000 people at the same time.
Upcoming Live Events
December 2, 2014, New York City
December 3, 2014, New York City
December 8-10, 2014, Reykjavik, Iceland
February 10, 2015, Atlanta, GA
April 14, 2015, New York City, NY
May 6, 2015, McCormick Convention Center, Chicago, IL
May 13-14, 2015, The Westin Peachtree, Atlanta, GA
June 9-10, 2015, Chicago, IL
Infographics
Irish Telecom outlines the rise of VoIP technology, including its adoption within businesses and their perception of its quality.
Hot Topics
$38.3M: Ain't That a Kik in the SMS
Sarah Reedy, Senior Editor, 11/20/2014
Do You Have a 2020 Vision?
Dennis Mendyk, Vice President of Research, Heavy Reading, 11/21/2014
Net Neutrality Even Mark Cuban Could Love
Mitch Wagner, West Coast Bureau Chief, Light Reading, 11/26/2014
$35B+ Spectrum Auction Dings Verizon, Shines Dish
Dan Jones, Mobile Editor, 11/24/2014
Operators Should Block Ads to Get Their Cut, Startup Says
Sarah Reedy, Senior Editor, 11/24/2014
Like Us on Facebook
Twitter Feed