Ciena's Changing of the Guard

When Ciena Corp. (Nasdaq: CIEN) announced yesterday that Gary Smith, formerly COO and president, would be the company's new CEO, it came as no surprise to many observers, who had been watching Smith climb up the executive ladder since he joined Ciena in 1997 as head of international sales.

Smith has gradually been assuming a more prominent role at Ciena, taking on the title of chief operating officer in 1999, and then adding the role of president late in 2000. His background is in sales execution, making him a good complement to the technology-oriented expertise of Patrick Nettles, the former CEO and chairman who will now take the title of executive chairman (see Pat Nettles, Ciena).

Wall Street appeared to have expected the news for some time.

”Gary’s well liked both inside and outside the organization,” says Paul Silverstein, an analyst with Robertson Stephens. “The change has been a long time coming, and he’s been groomed for the position. Investors are comfortable with him."

In a discussion with Light Reading yesterday, Nettles discussed the management shift and why it’s happening now.

”It’s recognizing the contribution that Gary has been making,” said Nettles. “As we look forward, with the kind of growth rates we’ve been experiencing, it would be nice to have a two-year period of conditioning, but the growth rate has caused us to increase speed. Gary’s skill set and leadership style and key role all bode well for his ability to lead in this kind of growth."

Nettles describes Smith as having a more direct and urgent management style than his own: “I tend to engage people in dialogues to allow people to come to the right conclusion. He does that too, but Gary’s dialogues are a lot shorter than mine."

Now that Smith has taken over the daily operations at Ciena, Nettles says he’ll be “decoupling” from daily operations to pursue technology direction, strategic relationships, and mergers and acquisitions.

Indeed, Smith seems more comfortable in the public eye, with a more aggressive persona than that of the laid-back Nettles. In Ciena’s quarterly call on Thursday, for example, Smith exuded confidence and even took shots at competitors -- referring to their “desperate pricing tactics,” and saying that Ciena is about to “pull away from the pack” during these times of economic uncertainty (see Ciena Struts Its Stuff).

One former Ciena employee says Smith, originally from the U.K., earned his stripes with big sales victories as vice president for international sales during Ciena’s grim days in the late 90s.

”As a relative newcomer, Gary took over worldwide sales at a time when Ciena had the need to sell to a much wider variety of customers, where the technology didn't give them a slam dunk,” says Doug Green, a former product manager at Ciena who is now vice president of marketing for Ocular Networks Inc..”This was something he had shown he could do in their international business.

”He was a great choice as president and COO to bring a customer driven perspective to the company to balance their technology focus. Now that Gary has proven himself there, he's a good choice as CEO as well. It's also a great time for Pat to hand over the reigns. With Ciena doing so well in this environment, what does he have left to prove?”

Wall Street barely flinched at the announcement, appearing more focused on immediate issues, such as the potential for a price war among vendors of long-haul optical gear. On Thursday, Ciena’s share price dipped slightly. On Friday, Ciena shares had risen 0.75 (1.32%) to 57.5 in late afternoon trading. — R. Scott Raynovich, Executive Editor, Light Reading
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