Ciena Shares Down, Despite More Sales
Although revenues increased, Ciena still hasn’t gotten rid of those nagging losses. The company reported a GAAP net loss of $74.8 million, or $0.13 per share. This loss compares to a GAAP net loss of $76.2 million, or a net loss of $0.16 per share, in the same period a year ago. The company reported a GAAP net loss of $57 million, or $0.10 per share, during its first fiscal quarter of this year (see Ciena Shows More Revenue, More Loss)
"Q2 was an eventful quarter on a number of fronts for us," said Ciena CEO Gary Smith on the earnings conference call held this morning.
Smith said there is "heightened activity around metro Ethernet transport and switching" that bodes well for Ciena. Ciena's positioning as a provider of Ethernet gear is helping to boost its equipment sales. "Our advances are meant to capitalize on the growing global demand for Ethernet." Oddly enough, Ciena appears to have gotten a lift from, of all things, its core and long-haul networking unit -- a source of pain for many years. Revenue increased 34 percent in core transport and switching, including storage, said Ciena officials. Long-haul networking and CoreDirector sales drove the revenue growh.
On the money front, the company reported that it has slowed its cash burn rate. It consumed $36.6 million in cash in the second quarter, down from $43.3 million in the first fiscal quarter. The company reports it has $1.19 billion in cash and in short- and long-term investments. About $500 million of that was net cash. Some analysts say the improvement in gross margins and cash burn may have led some investors to take an optimistic look at Ciena.
Ciena said gross margins improved from 25.6 percent in the fiscal first quarter to 26.2 percent in the fiscal second quarter. In the last quarterly earnings call, Ciena warned that gross margins could fall, so that represented an upside surprise.
”The anticipated meaningful improvement in gross margins is encouraging to us, since the stock sold off aggressively one quarter ago due to weak gross margins on good sales growth, and because it should likely drive upward revisions to consensus gross margins,” writes Lehman Brothers analyst Marcus L. Kupferschmidt in a morning research note. “It also suggests to us cash burn should decline more than expected, at least in the next few quarters.”
Customer highlights for the quarter included being selected for BT Group plc's (NYSE: BT; London: BTA) 21CN and an expansion of purchasing activities by Teléfonos de México (Telmex), said Ciena officials (see BT Unveils 21CN Suppliers).
Ciena also noted on the call that Steve Chaddick, the company's chief strategy officer and an 11-year Ciena veteran dating back to its pre-IPO era, is stepping down from his full-time position and taking on a consulting role with the firm.
— R. Scott Raynovich, US Editor, Light Reading