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Employment

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
http://www.lightreading.com
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ivehadit 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 found it interesting that a respectable organization like optical keyhole substantiated an observation of mine. another post on this thread suggests ciena is cutting back on coredirector support when everyone in the industry is ramping up on intelligent switching. all that suggests something.

good luck. i don't have any agenda.
VinceW 12/4/2012 | 10:43:25 PM
re: Ciena Slashes Some More are you answering a providing a vague answer to a question(s) that were not asked of you? How does your speculation on top of edwardly's unsourced statements have any credibility at all. As it relates to this discussion, the only agenda that I have that is challenging people who do not substatiate statements made about companies that I consider investment opportunities.
darkhorse 12/4/2012 | 10:43:25 PM
re: Ciena Slashes Some More First, I intend no innuendo. My concerns are my concerns regarding my ability to get support for a product that in my network. As far as where I get my information, I have spoken with the employees that have been affected in the RIF. If you would like it verified, I am sure that Ciena Corporate information would be glad to give you the information when they have it.
optical_maverick 12/4/2012 | 10:43:24 PM
re: Ciena Slashes Some More Bro, who cares.

Regards,

Mavi
Belzebutt 12/4/2012 | 10:43:24 PM
re: Ciena Slashes Some More The CIEN groupies here are getting almost as bad as the CORV groupies. Posting innuendo and articles about other companies is perfectly ok, but post one on their favorite stock, and you're accused of having an agenda.
VinceW 12/4/2012 | 10:43:24 PM
re: Ciena Slashes Some More are you answering or providing a vague answer to a question(s) that were not asked of you? How does your speculation on top of edwardly's unsourced statements have any credibility at all. As it relates to this discussion, the only agenda that I have that is challenging people who do not substatiate statements made about companies that I consider investment opportunities.
ivehadit 12/4/2012 | 10:43:23 PM
re: Ciena Slashes Some More bezlebutt,
i totally agree. the writings on the wall. the corvis guys split hairs until eternity. ciena's crowd is doing the same. one of the fundamentals of investing is: get the emotion out of your judgement.
dave77777 12/4/2012 | 10:43:22 PM
re: Ciena Slashes Some More Yeah we all know you NT groupies have no agenda lmao.

BTW, did you know NT was cashflow negative way back in 1999? lol they couldn't make real money even in a good market.
Phonon-Ex 12/4/2012 | 10:43:21 PM
re: Ciena Slashes Some More I personally neither own nor short
CIEN. I too see nothing wrong
in wondering why you would challenge
or seek to challenge "facts" that at
best, seem to be just frosting on
the RIF cake.

Why not use the Post key once, instead
of twice, unless you have a good reason
to do that too.
VinceW 12/4/2012 | 10:43:20 PM
re: Ciena Slashes Some More clarifying your source. Knowing where information comes from is alwasys helpful.

I understand your concern about support. Hopefully your company will not see any degradation in service/support quality.

My experience is that while RIF'ed employees almost always deserve and need empathy and support, they are not always unbiased in their assessment of the company that let them go. This is very understandable and not intended to be a negative shot. Let's hope they all land with their feet on the ground.


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