Ciena's Sublease Increase

To combat the weakness in the optical networking market, Ciena Corp. (Nasdaq: CIEN) is dead set on buying companies and getting into new businesses. That pursuit, among other things, has left Ciena with an awful lot of vacant office space, which the company is trying to sublease (see Real Estate Nightmare).

Light Reading discovered the extent of Ciena's property pileup after a message board post helpfully pointed to CienaSpace.com, a Website devoted to helping Ciena advertise the office space it continues to pay for, but can't use.

In four years, Ciena has spent more than $2.04 billion in stock and cash to buy six companies. The company will have about 900 employees following the completion of its latest layoffs and the addition of its latest acquisitions. When the shuffling is complete, Ciena will have about 72 percent fewer employees than the more than 3,100 it employed as of January 2001 (see Ciena Completes Acquisitions, Ciena Cuts 1/4 of Staff, and Ciena Buying Binge Alarms Analysts).

Given its rampant binging and purging, Ciena has wound up with an excess of more than 600,000 square feet of unused office space spread across 13 buildings in three states. That's enough space to fill Arizona's Glendale Arena (site of the 2006 NHL All-Star Game, if anyone's interested) with cubicles and fax machines.

The excess office space isn't detrimental to Ciena at all, but it doesn't appear to be helping the company, which has seen its share price fall about 40 percent since the beginning of this year. "The total minimum lease payments for these restructured facilities are $101.9 million," Ciena states in its Securities and Exchange Commission (SEC) filings. "These lease payments will be made over the lives of our leases, which range from seven months to fifteen years."

"There's no story here," writes a Ciena spokesman, in response to Light Reading's request to interview someone about CienaSpace.com. "It's no secret we've consolidated several facilities over the last few years.

"The Web site is just a marketing tool to facilitate the subletting process, which obviously benefits the company financially."

Ciena declined to comment further about the financial benefits. However, SEC filings reveal that the excess space did cause the company to take an additional $500,000 charge against earnings as recently as the company's first fiscal quarter of 2004.

— Phil Harvey, News Editor, Light Reading