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Ciena Skeptics Emerge

Light Reading
News Analysis
Light Reading
6/20/2001

How is Ciena Corp. (Nasdaq: CIEN) going to avoid all of the economic catastrophe in the telecom sector?

That's what stock analysts have been asking lately, as Ciena shares have held up better than other players in the midst of the telecom spending slump. Merrill Lynch & Co. Inc. was the latest to downgrade Ciena shares as it changed its rating on the stock today from Accumulate to Neutral.

Merrill Lynch analysts Michael E. Ching and Simon M. Leopold remain bullish on Ciena's technology, but lately they’ve been spooked by Ciena's peers and the market downturn in general. "It is now clear to us that no matter how good a product is, it is unlikely that market share gains will be enough to offset the market declines that we are now forecasting in this environment," their report states.

So, while the analysts see Ciena growing between 40 and 60 percent faster than the optical systems market in general, they think the market will "decline in 2001 and remain flat in 2002."

Merrill Lynch’s move follows a May 23 downgrade by Morgan Stanley Dean Witter & Co. and an April 27 downgrade by Salomon Smith Barney. In each case, the analysts spoke admiringly about Ciena’s technology and long-term prospects but hedged their comments with concerns about spending in long-haul networks and the tendency for carriers to suspend or delay orders.

Interestingly, though, Ciena has yet to turn in a disastrous quarter and the firm keeps scrounging for positive news (see Ciena Struts Its Stuff). It announced today that Telecom Developpement (TD), a French service provider, will continue a relationship it has had with Ciena since 1998 -- one that keeps Ciena as a supplier of long-haul gear for its 30-city network (see Ciena Wins French Contract).

In a sense, the company does look exposed to the telecom weakness. Its next-generation DWDM switching product, the CoreDirector, has been enormously successful. But that only accounts for about 10 percent of the company's revenue. Most of its business comes from systems that are targeted at long-haul networks. And that's one of the areas experiencing the sharpest drop-off in the telecom sector.

Shares of Ciena dropped $0.94 (2.5%) to 35.80 in early afternoon trading. Ciena’s third fiscal quarter for 2001 ends on July 31.

- Phil Harvey, Senior Editor, Light Reading
http://www.lightreading.com

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opticalnutjob
opticalnutjob
12/4/2012 | 8:12:50 PM
re: Ciena Skeptics Emerge
phil-
you say that most of ciena's business is done in dwdm and sonet systems. dwdm, maybe. sonet though? which product are you talking about?
thanks-
ong
lu-alum
lu-alum
12/4/2012 | 8:12:46 PM
re: Ciena Skeptics Emerge
>What SONET equipment.

Core Director dude. A switch that cross connects things at the STS-1 Level is basically a SONET DCS. Albeit a very intelligent and cost effective one.
opticalnutjob
opticalnutjob
12/4/2012 | 8:12:45 PM
re: Ciena Skeptics Emerge
phil-

so you changed "dwdm and sonet" to "longhaul network backbone." brilliant. why can't you respond to my message and admit that you made a mistake.

true, most of their exposure is in the longhaul market, but that's very different from legacy dwdm & sonet. if a carrier is going to invest today, they're going to do it wisely... next-gen equipment that ciena offers seems to be on the upswing in these hard times. maybe you want to put that in your article to. no need to respond to this message.

-ong
rredfield
rredfield
12/4/2012 | 8:12:43 PM
re: Ciena Skeptics Emerge
Isn't Cyras SONET.
flanker
flanker
12/4/2012 | 8:12:42 PM
re: Ciena Skeptics Emerge
Ciena has a pretty good marketing team. They just happen to be closers.
pkumar
pkumar
12/4/2012 | 8:12:42 PM
re: Ciena Skeptics Emerge
Yes, Cryras main focus is in the Metro solution for supporting multiple service IP,ATM, ethernet over SONET.
iprsvp
iprsvp
12/4/2012 | 8:12:39 PM
re: Ciena Skeptics Emerge
Ciena is going to be up for the rest of the
year 2001 and it is going to start falling starting next year....Don't ask me why...
Freaksflock2gether
Freaksflock2gether
12/4/2012 | 8:12:34 PM
re: Ciena Skeptics Emerge
Why?
fatchance
fatchance
12/4/2012 | 8:12:14 PM
re: Ciena Skeptics Emerge
From 2001 to 2003 we should see a drop in Cap Ex, as a percent of revenue, by 30%. If revenue grows slowly and CapEx is in line with historical trends we'll see more moderate equipment orders. Unless Ciena has new products and new customers to off set this they will also see this slowing of orders. Since the stock market looks at rate of growth as a way to set prices it seems there is no way they can avoid being hit. It depends upon how big a P/E ratio people are willing to pay for their stock. Meanwhile other sectors, (blue chips??) may appear more attractive to investors.
aaaaaaptics
aaaaaaptics
12/4/2012 | 8:12:11 PM
re: Ciena Skeptics Emerge
CIEN will lose market share to CORV when the market turns IMHO. CORV provides the best all optical solution as i see it. i liked CIEN last year, but i am amazed by CORV productt line. albeit, i have no clue to how they do it (raman amplification) but it works and they can ship it today. not a CD demo or slide show but an actual switch that you can order today. LU (lambda router), NT (Xros' switch), CIEN (lil help- it's not the coredirector), & SCMR better come out with something quick or else....
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