Ciena Cuts 1/4 of Staff

Good luck getting a seat at Gordon Biersch this afternoon. San Jose's bars will probably be overrun as Ciena Corp. (Nasdaq: CIEN) announced it will cut some 25 percent of its employees -- 425 people -- in order to begin closing its San Jose offices and consolidating those plants (see Ciena to Cut 425 Jobs).

The move, while huge in scope, isn't a surprise. Faced with poorly performing optical and long-haul product lines for several quarters now, Ciena vowed that it would cut its costs by between 10 and 20 percent by the year's end.

With these cuts, Ciena is trying to signal that it is serious about becoming a data networking vendor. Sources close to Internet Photonics Inc. and Catena Networks Inc. say Ciena was discussing its plans to cut back its optical staff even while negotiating to buy those companies. The two soon-to-be-acquired firms aren't affected by this announcement.

The cuts are significant, too, in that they effectively signal the end of any remaining remnants of ONI Systems, Lightera, and Cyras -- three Ciena-acquired companies that were all located near San Jose.

The products being developed and supported in San Jose will be supported by other Ciena teams across the country. CoreDirector development will take place in Alpharetta, Ga., and Ciena's headquarters in Linthicum, Md. And the Online WDM platforms will be handled out of Research Triangle Park, NC. It's not clear what will come of Ciena's next-generation Sonet system, MetroDirector K2.

The cuts will save Ciena between $60 million and $70 million a year. The company expects to take a total restructuring charge against earnings of between $75 million and $85 million to pay for the restructuring.

— Phil Harvey, News Editor, Light Reading