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Ciena Scores Big In Q3

Light Reading
News Analysis
Light Reading
8/17/2000

Ciena Corp. (Nasdaq: CIEN) is flying high after announcing third quarter results on Thursday that beat Wall Street expectations.

Revenues for the quarter grew more than 25 percent from $185.7 million in the second quarter to $233.3 million for the quarter that just ended on July 31. This amounts to an 80 percent growth from the $128 million of the same quarter a year ago. Net income for the third quarter was $28.2 million, or 19 cents a share, compared with $18.4 million and 12 cents a share in the same period last year. Wall Street analysts had predicted the company’s earnings at 17 cents a share, according to First Call/Thomson Financial.

“What a difference a year makes,” said Ciena president and CEO Patrick Nettles on a conference call Thursday. “We are transitioning from a tactical relationship with customers to more strategic partnerships.”

These partnerships, Nettles hopes, will help the company continue to sell a breadth of products continuously into service provider networks.

This was the first quarter that Ciena realized revenue from its optical switching product, MultiWave Core Director. As of the end of its third fiscal quarter, the company says it had recognized revenues from three customers who had accepted CoreDirector for deployment. Ciena also says seven other service providers are currently trialing CoreDirector.

Customers are not only looking to replace legacy equipment with next-generation optical switching, but they are also looking to go deeper into the network, taking a layered approach to switching, said Ciena execs today. Still, the bulk of Ciena’s revenue continues to come from transport technology, and the company says it is continuing to improve channel counts and distance requirements.

In all product lines, from the long-haul network to the metropolitan area network, Ciena says that Nortel Networks Corp. (NYSE/TSE: NT) is its biggest competitor. “We used to see Monterey in the beginning, sometimes Tellium Inc., and occasionally ONI Systems Inc. [Nasdaq: ONIS] in the metro,” said Nettles. “But we are more and more going into existing Nortel accounts.”

This past quarter Ciena also became the first optical networking equipment vendor to announce the deployment of 10-Gbit/s transmission capability in a metropolitan network application. The MultiWave Metro product, which offers features that simplify metropolitan network designs and is designed to drive down the cost-per-bit in local networks, will be shipping later this year, according to the executives.

As for the immediate future, Ciena executives are very bullish about the company’s upcoming fourth quarter. They say that the company will beat expectations yet again. Wall Street seems to like what it’s hearing. After a two-for-one stock split on Tuesday and incredible earnings on Thursday, stock was up about $10 a share to about $173 in midday trading.

Other big earnings news is expected to come from Ciena rival Sycamore Networks Inc. (Nasdaq: SCMR), which will be announcing earnings August 24 at 4:30 PM EST.

-- Marguerite Reardon, senior editor, Light Reading, http://www.lightreading.com

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