& cplSiteName &

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.
Light Reading’s Upskill U is a FREE, interactive, online educational resource that delivers must-have education on themes that relate to the overall business transformation taking place in the communications industry.
NEXT COURSE
Wednesday, September 14, 1:00PM EDT
What Is Agile?
Kent J. McDonald, Product Owner, Agile Alliance
UPCOMING COURSE SCHEDULE
Friday, September 16, 1:00PM EDT
How to Implement Agile
Alan Bateman, Director, Agile Transformation
Wednesday, September 21, 1:00PM EDT
What Is DevOps?
Colin Kincaid, CTO, Service Provider, Cisco
Friday, September 23, 1:00PM EDT
How to Implement DevOps
,
in association with:
From The Founder
Light Reading today starts a new voyage as part of a larger Enterprise.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
Between the CEOs
CEO Chat: UXP's Gemini Waghmare

8|26|16   |     |   (0) comments


Light Reading CEO Steve Saunders and UXP Systems CEO Gemini Waghmare discuss the strategic importance of digital identity for operators in the midst of transformation.
LRTV Custom TV
F5 Virtual Network Function Integrations With Partner Orchestration Platform

8|24|16   |   6:38   |   (0) comments


F5's Kishore Patnam, product manager for F5's service provider solutions, discusses why service providers are moving towards virtualization and how his clients are utilizing F5's solutions.
Between the CEOs
CEO Chat: Intel's Alexis Black Bjorlin

8|17|16   |   06:23   |   (0) comments


Join us for an in-depth interview between Steve Saunders of Light Reading and Alexis Black Bjorlin of Intel as they discuss the release of the company's Silicon Photonics platform, its performance, long-term prospects, customer expectations and much more.
Telecom Innovators Video Showcase
Accelerating Telecom Digital Transformation With Nominum DNS

8|1|16   |   12:04   |   (0) comments


Light Reading's Steve Saunders gets an update from Nominum CEO Gary Messiana on how his company is helping carriers on the digital transformation journey.
LRTV Custom TV
Reinventing Operations for a Virtual, Software-Defined World

7|28|16   |   5:23   |   (0) comments


Heavy Reading Senior Analyst Jim Hodges speaks with Accenture's Larry Socher and Matt Anderson about what service providers must do to transform their business to get the benefits of SDN and NFV including: leveraging DevOps, introducing real-time OSS and implementing analytics.
Women in Comms Introduction Videos
Fujitsu Sales Leader Shares Lessons Learned

7|27|16   |   5:12   |   (1) comment


As Fujitsu's only female sales leader, Annie Bogue knows the importance of asking for what you want, being flexible (she's been relocated five times), keeping a meticulous calendar, 'leaning in,' working harder than everyone else around you, being aware and more.
Telecom Innovators Video Showcase
VeEX Test & Measurement Solutions

7|25|16   |   08:57   |   (0) comments


Cyrille Morelle, president and CEO of VeEX Inc., talks test and measurement with Light Reading's Steve Saunders at BCE 2016. This includes innovative products such as VeSion Cloud-Based platform for network monitoring; MTTplus Modular Test platform for Access, Business, Carrier Ethernet, Transport and Core services; and OPX-BOX+ for Fiber Optics.
LRTV Custom TV
VeEX: Live From BCE 2016

7|25|16   |   03:20   |   (0) comments


VeEX's Senior Director of Business Development, Perry Romano, explains how VeEX provides tools to help install, maintain, monitor and manage network infrastructure efficiently and effectively. The portfolio of products on display include the RXT-6000, MTTplus and TX300s.
LRTV Custom TV
Real-Time Telemetry & Analytics for Intelligent SDN Orchestration

7|25|16   |   03:09   |   (0) comments


Packet Design CEO Scott Sherwood discusses how real-time network telemetry and analytics are enabling a new breed of SDN orchestration applications.
From the Founder
The Russo Report: Driving Disruption

7|25|16   |   07:44   |   (2) comments


In the first episode of a four-part series, Light Reading Founder and CEO Steve Saunders and Calix President and CEO Carl Russo drive around town discussing the disruptive mega-changes in the communications industry and where hope lies for service providers to meet the escalating demands of the cloud.
LRTV Custom TV
NetScout: Maximizing Enterprise Cloud for Digital Transformation

7|20|16   |   04:53   |   (0) comments


Light Reading Editor Mitch Wagner talks to NetScout CMO Jim McNiel about maximizing the benefits of enterprise cloud and digital transformation while minimizing potential pitfalls with a proper monitoring and instrumentation strategy.
Women in Comms Introduction Videos
Ciena's VP Offers a Career Crash Course

7|20|16   |   4:14   |   (2) comments


How did Ciena's Vice President of Sales, Angela Finn, carve out her career path? Simple, she tells WiC. She stayed true to her company, customers and principles. She shares her advice for women on how to be authentic and credible, as well as for companies that want to make a real change to their culture and practices.
Upcoming Live Events
September 13-14, 2016, The Curtis Hotel, Denver, CO
November 3, 2016, The Montcalm Marble Arch, London
November 30, 2016, The Westin Times Square, New York City
December 1, 2016, The Westin Times Square, New York, NY
December 6-8, 2016, The Westin Excelsior, Rome
May 16-17, 2017, Austin Convention Center, Austin, TX
All Upcoming Live Events
Infographics
Hot Topics
Google Fiber Can't Be Called a Failure
Carol Wilson, Editor-at-large, 8/26/2016
FirstNet: A Billion-Dollar Boondoggle?
Dan Jones, Mobile Editor, 8/26/2016
WiCipedia: Should Men Be Included? & Olympians Face Discrimination
Eryn Leavens, Special Features & Copy Editor, 8/26/2016
Is There No Stopping Huawei?
Iain Morris, News Editor, 8/26/2016
How the Padres Hit an IoT Home Run
Mitch Wagner, West Coast Bureau Chief, Light Reading, 8/25/2016
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
Light Reading CEO Steve Saunders and UXP Systems CEO Gemini Waghmare discuss the strategic importance of digital identity for operators in the midst of transformation.
Join us for an in-depth interview between Steve Saunders of Light Reading and Alexis Black Bjorlin of Intel as they discuss the release of the company's Silicon Photonics platform, its performance, long-term prospects, customer expectations and much more.
Animals with Phones
Live Digital Audio

Bridging the tech skills gap is a major challenge for service providers and suppliers alike today – and the challenge is two-fold when it comes to increasing the number of women in the comms space. Level 3 Communications has made it a priority to overcome both challenges by implementing several unique programs focused on building the right candidates from within – in addition to filling the funnel by supporting STEM and other education programs. During this radio show, you’ll learn about these programs from Mary Beth McGrath, SVP of Global Talent Management at Level 3, and the best ways to bridge your own skills gap so that you are motivated and equipped for change. Plus you’ll have the chance to ask Mary Beth your questions live on the air.