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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fleshpeddler 12/4/2012 | 10:20:36 PM
re: Ciena Slashes Some More they are losing almost 1/2 their headcount.
sonet49er 12/4/2012 | 10:20:37 PM
re: Ciena Slashes Some More In a rare move I find myself somewhat in agreement with BobbyMax aka HarveyMudd.

The price tag was less than $4 Billion and I do believe Ciena was not worth the $40/share it was trading at the day the Cyras deal closed.

If you do read the filing of the deal under history of the deal there were performance clauses in the deal, the mistake made was waiving them once "Company B" entered the picture as a rival acquirer.
k_j 12/4/2012 | 10:20:37 PM
re: Ciena Slashes Some More A friend of mine mentioned things were not looking as fantastic as hoped.

Are rumors true?
BobbyMax 12/4/2012 | 10:25:05 PM
re: Ciena Slashes Some More Ciena paid over 4 Billion dollars to acquire Cyras. This was tghe bigesy risky adventure for Ciena and the company is paying a big price for its misadventures. It paid too much but got very little as far as any meaningful product is concerned. Tgey boght the company without proper due dilligence.
nagogpark2002 12/4/2012 | 10:41:48 PM
re: Ciena Slashes Some More Anybody heard how this company is doing? One of my ex-colleagues recently layed off at Ciena got hired at Gotham. I read somewhere that they had are having success in soem customer trails. How come no official news?
smokeNmirrors 12/4/2012 | 10:41:51 PM
re: Ciena Slashes Some More Although this has been a rumor for years, I think this may soon be a reality. Too much recent coverage in stock chats, and too many layoffs at CIEN. It actually makes sense.

CIEN: Wait for ONI Acquisition to be completed. Drop K2, Drop CIEN Metro, Keep CoreDirector, Keep ONI Metro and LH/ULH (Corestream??) Products.

CSCO: Monterrey Dead (Need CoreDirector), Drop Pirelli (Use Corestream), Drop Metro (Use ONI), Keep 15454 (Kill K2).

Could spell trouble for NT & LU.

The only thing CSCO would not have is a legacy voice story. They will just hope that VoIP will take off.

gustro 12/4/2012 | 10:42:03 PM
re: Ciena Slashes Some More It should be fairly obvious at this point, why I still work for a living(and not as an investor). I got a little caught up in the moment and slipped into 'win one for the Gipper' mode.
PhotonGolf 12/4/2012 | 10:42:10 PM
re: Ciena Slashes Some More Gusto ...

Your credibility was so high before that last sentence!

- P
gustro 12/4/2012 | 10:42:14 PM
re: Ciena Slashes Some More Just to clear the air about Ciena and supporting the CoreDirector. Around 10% of the organization for CD support has been let go. Whoever got the 36 reduced to 4 numbers probably smoked enough ganja that the numbers were transposed. Try letting 4 of 36 sink in. Otherwise it was clearing the way for the intergration of product lines with ONI. So if you would like a nice way to make some money, buy now.
VinceW 12/4/2012 | 10:42:35 PM
re: Ciena Slashes Some More puddnhead,

You are being much too kind to this clown. The good news is that he probably wonGÇÖt be writing for the business world very long. My favorite sentence was: GÇ£Even though we had accused CIENA management of being in a permanent state of denial on the subject, we naturally assumed that that was just part of the normal defensive carapace of a beleaguered management - not really to be approved of but sufficiently common to be seen as sadly understandable.GÇ¥

Two bits says that THEY have no concept of why WE are laughing so loud. LOLLLLLLLL
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