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Ciena Still Struggling for Profitability

Ray Le Maistre
12/13/2012
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Ciena Corp. (NYSE: CIEN) reported its fiscal fourth-quarter and full-year financials early Thursday and the primary color was red.

It also painted a discouraging picture for the current quarter that runs to the end of January 2013.

The vendor reported a net loss of $38.8 million from revenues of $465.5 million for the three months ending Oct. 31. Its adjusted (or non-GAAP) loss, after one-time costs, was still in negative territory, coming in at $6.7 million, or 7 cents per share.

Financial analysts had, on average, been expecting a non-GAAP loss of 6 cents per share from revenues of $468.3 million for the fourth quarter.

The news sparked a 2 percent dip in Ciena's share price, to $15.25 in pre-market trading.

Ciena has been struggling to achieve profitability this year. (See Ciena Reports Fiscal Q3 Loss of $29.8M, Ciena Marks $28M Q2 Loss and Ciena Posts Slimmer Q1 Loss.)

That trend, naturally, shows up in its full-year numbers. For fiscal 2012, Ciena generated revenues of $1.83 billion, up about 5 percent year-on-year, and a net loss of $144 million. Its full-year non-GAAP loss was 23.5 million, or 24 cents per share, slightly worse than Wall Street had expected.

For the first quarter of its new financial year, "a quarter in which we typically experience seasonal reductions in order volume and customer deployment activity," Ciena noted that it expects revenues in the range of $435 million to $460 million. Analysts are currently expecting $458.6 million in revenues, so may revise their expectations in light of Ciena's forecast.

As ever, though, Ciena's CEO Gary Smith is talking up the company's situation. In the earnings release he states that Ciena "continued to significantly outpace the market and take share in 2012 despite the challenging environment. That momentum resulted in record order flow and year-end backlog," he adds.

Ciena's results come on the heels of some transport sector consolidation action and a report from Ovum Ltd. that suggests the optical networking equipment sector has been shrinking in 2012. (See Ovum: Optical Networking Market Shrinks Again and NSN to Sell Optical Business.)

That trend is borne out by Ciena's fourth-quarter sales figures for its core transport products. Its Packet-Optical Transport portfolio generated sales of $289.4 million, down 2.3 percent from a year earlier, while the Packet-Optical Switching portfolio generated revenues of $20.5 million, down 50 percent year-on-year.

Ciena's not alone, of course, in feeling the effects of a shrinking optical market. (See Margin Misery for Alcatel-Lucent.)

But not every Ciena division is seeing its sales slide. Carrier Ethernet sales are up, by 66 percent to $47.9 million, while Software and Services grew more than 20 percent year-on-year to $107.7 million.

— Ray Le Maistre, International Managing Editor, Light Reading

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