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Optical/IP

Ciena Warns of Revenue Miss

Ciena Corp. (Nasdaq: CIEN) shares fell sharply in after-hours trading on news that the company's revenues for its second quarter will fall short of targets.

"Due to Successful Cost Control and Expense Reduction Efforts, Expects Non-GAAP Loss Per Share Within Previous Guidance Range Despite Expectations of Lower-than-Anticipated Revenue," says a portion of the press release, just daring the reader to stay awake.

The translation: Revenue growth will be non-existent. Ciena had predicted sequential revenue growth of as much as 30 percent.

The company's shares fell $0.40 (14.5%) to $2.36 after-hours, after closing flat at $2.76 during normal trading on Tuesday (see Ciena Predicts Flat Q3).

Judging from some of the comments on the Yahoo Finance message board, the move wasn't exactly summoning forth glee: "SELL THIS ZOMBI!!!" read one message. "DELIST THIS PIG ITS A DISGRACE!" Positive (and literate) messages were hard to come by, though one lonely investor seemed to think the low stock price would spur a buyout. (Feel free to post your own carefully reasoned opinions on Light Reading's Ciena message board.)

Ciena thought it was going to report fiscal second-quarter revenues as high as $97.1 million. Analysts surveyed by Reuters Research expected Ciena to report revenues of $94.8 million. Unfortunately, Ciena is now saying its revenues are going to be closer to $75 million -- a full 21 percent off Wall Street's expectations.

The company expects that its loss per share will fall within a range of 24 cents to 26 cents. Its pro forma loss per share is expected to be in the range of 7 to 8 cents, better than Wall Street's anticipated loss of 32 cents a share.

CEO Gary Smith said half the revenue shortfall was due to two customers -- one service provider that pushed out a long-haul transport order and one carrier that delay its deployment of CoreDirector switches.

Adding to the fear, uncertainty, and doubt, Ciena blamed the revenue shortfall on "cautious spending and deployment delays by its large service provider customers, including a deceleration of DSL-related orders in North America."

Acquisitions caught a sliver of blame as well. "We experienced more disruption than anticipated in integrating Catena and Internet Photonics," Ciena's Smith said on a conference call.

Smith defended his company's strategic direction, but said that the timing of carrier spending is always tough to nail down. "There is no doubt, when you listen to carriers, that they're focus remains on rolling out high-bandwidth services to customers as quickly as possible," Smith said on the call. "Clearly we need to translate those opportunities to revenue against a backdrop that's anything but certain."

— Phil Harvey, News Editor, Light Reading

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oni_guy 12/5/2012 | 1:24:01 AM
re: Ciena Warns of Revenue Miss
The product won't make a penny anyway?

Look they predicted almost 30m more revenue
but the loss is about the same.

Now they are 30m short but the loss is as predicted. Does this mean the products when sold merely cover the cost?
tobeit 12/5/2012 | 1:24:00 AM
re: Ciena Warns of Revenue Miss With a company whose revenues depend on a handful large account customers such revenue fluctuations are expected - but still not good to have.

The article does not give any additional view or info, which is not already available from the press release itself. "Judging from some of the comments on the Yahoo Finance message board" shows the depth of the article as well.
optiplayer 12/5/2012 | 1:23:59 AM
re: Ciena Warns of Revenue Miss Tobeit,

Some level of lumpiness is to be expected when selling to carriers but what is most troubling about CIEN is the pattern. CIEN today is much like Lucent a few years ago - a company that "warns" of an earnings or revenue miss almost every quarter. Lucent eventually cleared house at the senior management level while Smith and Co continue to destroy shareholder value quarter after quarter.

Have you heard of any other company talking about a DSL slowdown? What a joke, it appears that they even screwed up Catena - a company with a unique solution and a contract with Bell South.

It used to be that CIEN is different because they sell "next gen" gear that LU and NT didn't have. Then it was CIEN is different because they have a great balance sheet and will invest while others cut. Well the balance sheet has been decimated, they have nothing to show for the investment and the stock is at $2 and change.

Where is the BoD?

Changing topics - any thoughts on the customers who delayed purchases? MCI for transport and BT for CD perhaps?
Balet 12/5/2012 | 1:23:56 AM
re: Ciena Warns of Revenue Miss I wonder if Ciena's top management was hired by Mr. Huber to drive them down to the toilet to make Corvis look good.

Unfortunately, many ex-Ciena top managers, especially from "old good days" MD team do not impress me at all, even they got board sits and nice positions at a few poor startups.

Just one more proof - $$ is all about luck, even stupid people can make a big buck. Welcome to America!
SIVROCX 12/5/2012 | 1:23:53 AM
re: Ciena Warns of Revenue Miss First of all it is Dr. Huber to correct, what I'm sure was a type-o! Second, maybe it might just be that Dr. Huber finally figured out why the old Bell system, a vertically integrated company, was so successful. They controlled both the delivery of services as well as the technology. While I'm not a huge fan of Corvis, still holding stock, it seems to me that it might be the only start-up to emerge, albeit a different company, from this melt down. Not a slam Balet, just a point. +£
zillionaire 12/5/2012 | 1:23:52 AM
re: Ciena Warns of Revenue Miss Time to vote for another round of fat bonuses for the executive staff.....
Sibylle 12/5/2012 | 1:23:50 AM
re: Ciena Warns of Revenue Miss CIEN is still at ~5 times sales. This is not sustainable for a couple of reasons. NT and LU are both around 1.5 and the economics for the industry don't look good. The top line revenue is falling and will continue to fall. Given these two factors - high P/S ratio and poor long term fundamentals for the industry one could make a case for a P/S ratio of as low as 1. Watch out below.

On a different level one could make a case that what we are witnessing, and will continue to witness, is a deflating of the bubble. Yes Virgina the bubble, contrary to conventional wisdom, still persists. Sustained by way below 'normal' interest rates, still-too-shady-industry-wide accounting practices and way-over-invested-common-sense-challenged VCs.

Fasten your seatbelts.

Sib
chuntaoh 12/5/2012 | 1:23:49 AM
re: Ciena Warns of Revenue Miss I am doing a school paper and wondering who are in the need for APDs other than those big name companies such as NEC, Lucent, Nortel... Is anyone can show me a way to find the information?
optiplayer 12/5/2012 | 1:23:48 AM
re: Ciena Warns of Revenue Miss I'm no fan of CIEN but simply looking at P/S is not a reliable valuation metric.

CIEN has net cash of around $1.30/share which should provide a floor for the stock. I also wouldn't write off the Catena products though CIEN's claim that DSL is slowing was troubling.

Finally, I think a management change propels the stock higher and I have to believe a change is coming as this team has lost all faith/credibility with Wall Street, investors and probably employees.

I wouldn't buy CIEN now but its not going to $0.40/share any time soon.
Sibylle 12/5/2012 | 1:23:48 AM
re: Ciena Warns of Revenue Miss Optiplayer,

I agree, P/S is by itself insufficient. But it is the hardest-to-fudege metric out there.
And yup, CIEN has an intrinsic asset value of $1.30 as you say - so that sets a bottom on the stock - but only for the short term. There's nothing which says stocks have to trade at or above the intirnsic value (remember tellium?). Also, this value will erode over time - especially with this mgmt team. Sure a mgmt change may provide a bump - but just a short term one. The reality is Ciena is under siege - due to company specific and industry specific trends. And the noose just got tighter.

Keep playing.

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