Ciena Slashes Some More

Ciena Corp. (Nasdaq: CIEN) announced today that it would be cutting another 650 jobs from its roster (see Ciena Lays Off 22 Percent).

"The telecom equipment market has changed dramatically in the last year and we have to adjust to those changes if we are to maintain our leadership position in the industry," said Gary Smith, president and CEO of Ciena in a prepared statement. "Ciena's future success depends on our ability to adapt the way we think and the way we run our business in this dynamic environment."

This is the third round of layoffs the company has announced in the past six months. In November 2001 it announced it would cut 380 jobs, and in February 2002 it announced it would cut 400 (see Ciena Boosts Numbers, Cuts Jobs). After this latest round, the company will have a headcount of 2,275.

The latest cuts are directly related to the drop in demand from two of Ciena’s main customers, a situation that was announced last month during the company’s first-quarter 2002 earnings call, says Glenn Jasper, a spokesperson for the company (see Ciena: Outlook Dim). Though the company never mentioned which customers had pulled back on orders, the general feeling in the industry is that it was Qwest Communications International Inc. (NYSE: Q) and Sprint Corp. (NYSE: FON).

“The information we received just before our Q1 earnings call certainly has something to do with today’s layoff,” Jasper says. “We realized we just couldn’t support the current headcount based on the new information that was given.”

The layoffs come as no surprise to investors either. At midday Ciena's stock was trading up slightly $0.015 (1.80%) to $8.50.

Some Wall Street analysts said they were happy with the news, because it makes the company leaner in the tough times.

"It’s good to see them making the tough decisions they need to make," says Rick Schafer, an analyst with CIBC World Markets. "Visibility is not improving."

The job cuts are projected to effect $145 million to $155 million in annualized cost savings, including approximately $85 million to $90 million at the operating expense level, prior to restructuring-related charges. Ciena expects that the majority of the cost savings will be in place by its Q3 2002.

Employees affected by the layoff, most of whom reside in the Washington and Baltimore areas, will be paid through May 24, 2002. Depending on tenure, they will also be eligible for additional severance packages and will receive outplacement assistance and training, according to the news release.

For the second quarter of 2002, the company expects to record a restructuring charge between $125 million and $135 million associated with the layoffs, lease terminations, non-cancellable lease costs, and the write-down of certain property, equipment, and leasehold improvements. This is on top of the $9 million to $11 million charge it expects in Q2 for the February job cuts. The company also anticipates a charge of about $200 million to $225 million, related to excess inventory.

But Schafer says that he doesn’t expect the new layoffs to affect the company’s cash burn rate significantly this year, and it lowers the break-even point. Instead of a break-even at around $300 million, Schafer says he now expects it to be around $250 million. He also expects the company to burn through about $50 million in cash per quarter. This, coupled with the approximately $150 million in debt inherited from the Cyras acquisition along with the cash charges for restructuring, mean that the company will likely burn about $400 million this year. But with over $1 billion in cash on hand, Schafer says this is not too alarming.

“Ciena is a survivor,” he says. “And they are trying to make good strategic moves so that when things pick up again they will emerge as an effective player.” One question left still unanswered is what will happen to the roughly 700 employees that work for ONI Systems Inc. (Nasdaq: ONIS). Ciena announced back in February that it would acquire the company (see Ciena and ONI: Wedding of the Year?). Last October, ONI also trimmed its expenses with a 16 percent workforce cut (see ONI Slims Down ).

Jasper would not comment on the merger or what will likely happen to the new employees. As for future layoffs, he says that today’s measure “dramatically lessens the likelihood that we will have more reductions.

“Obviously, we continue to monitor the environment. And we’ll make the decisions we have to make.”

— Marguerite Reardon, Senior Editor, Light Reading
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owl-light 12/4/2012 | 10:43:32 PM
re: Ciena Slashes Some More ... that's "capital", less anyone get too excited.
owl-light 12/4/2012 | 10:43:32 PM
re: Ciena Slashes Some More "But with over $1 billion in cash on hand, Schafer says this is not too alarming."

And still no concern over the alarming deficit in moral captital. Just another example of a company in an industry that continues to attempt to shift the blame away from themselves to such easy targets as CLEC and RBOC spending. When their deconstruction was inherent and inevitable from their beginnings; fueled by investor hype, lying leadership and greedy practitioners. What if truth were as prevalent as stock options and courage as prevalent as chipsets? They don't deserve to, but they are needed and will survive; much like Congress, our education system and other such fine things.
darkhorse 12/4/2012 | 10:43:30 PM
re: Ciena Slashes Some More The states that most of the layoffs have come in the Washington-Baltimore area. Intresting...The have laid off all tech support in Dallas and Tulsa. The have reduced their Core Director Tech support from 36 to six. Are the planning on not supporting their switch?
ivehadit 12/4/2012 | 10:43:30 PM
re: Ciena Slashes Some More to continue the other thread here, optical keyhole also says ciena's losing market share...


VinceW 12/4/2012 | 10:43:29 PM
re: Ciena Slashes Some More Where did you get your information that CD tech support was reduced from 36 to 6? Where did you get your information about lay offs of all tech support in Dallas and Tulsa? When did that happen? How many people were laid off in Dallas and Tulsa? If you can back up your statements with vefifiable sources, please include them with you messages. If you can't then please explain why are you making these statements and raising innuendos about Ciena not supporting their products?
puddnhead_wilson 12/4/2012 | 10:43:28 PM
re: Ciena Slashes Some More iuvehadit, in your posts here you continue to say things with no support, or just misstate what others write. For example you most recently wrote:

>optical keyhole also says ciena's losing market share...

The closest thing I can see in this article to that is:

"The possibility that the company, despite still being perhaps a technical leader in some areas, might nonetheless be losing share, seems to be regarded as axiomatically inadmissible by the company's management and "share groupies" alike."

i.e. you take "it's possible they could be losing share" and change it to "ciena IS losing share."

Either learn to read, or reveal your agenda.

p.s. what an overwrought piece of writing that article is. Not to mention the information content is nearly zero (no facts, just usnsupported suppositions and obtuse references to WWI!) Even their argument about Sprint and Quest cuts not explaining all of the recent revenue shortfall is bizarre. Ciena isn't even remotely suggesting that other customers aren't limiting purchases too. Duh.
darkhorse 12/4/2012 | 10:43:26 PM
re: Ciena Slashes Some More I haven't heard anything about the Atlanta issue but i am aware of them laying off quite a few in the Mass area. As far as credability, I ask you to prove me wrong. There is on TSE in Dallas and he is contractually committed to a carrier.
puddnhead_wilson 12/4/2012 | 10:43:26 PM
re: Ciena Slashes Some More >puddnhead_wilson, i don't want an argument. you're in denial.

I have denied nothing about CIENA's condition, all I have done is point out your distortion of others' words on the topic. This time it is MY words you are either misreading or misstating.
Phonon-Ex 12/4/2012 | 10:43:26 PM
re: Ciena Slashes Some More Good job on the detective work Darkhorse.
You have perhaps pi$$ed off a bunch of
CIENA stockholder/employees posting
on this thread. Have you heard anything
about the CIENA Atlanta plant lay-offs?
That's their metro division I think,
which may become redundant if the ONIS
merger is approved
Phonon-Ex 12/4/2012 | 10:43:26 PM
re: Ciena Slashes Some More VinceW

I cant tell from your post whether you
are curious or worried, which if you
are tells me that you are either employed
by Ciena, or are a stockholder. To answer
your question, this info probably became
available from laid-off employees,ie,
highly-credible sources
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