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Global Sales Boost Ciena in Q2

International sales growth and increased success selling to web-scale companies helped Ciena grow revenues 3% and beat Wall Street expectations on its decline in profits, which led to a stock uptick today.

For its second quarter, ending April 30, Ciena Corp. (NYSE: CIEN) reported profits of $14 million, or 10 cents a share, down from $20.7 million, or 17 cents a share, a year earlier. Its revenue climbed 3.1% to $640.7 million.

In talking to analysts, Ciena CEO Gary Smith touted design principle success as one of his company's primary competitive strengths, as it is allowing Ciena to sell to a wide range of players beyond its traditional telecom market, including three of the top five web-scale companies, governments here and abroad, enterprises and utilities.

"We are seeing our technology consumed in many different ways and we view this dynamic both as a competitive advantage and opportunity for Ciena," Smith told analysts on the earnings call. Based on "design principles such as modularity, open APIs and programmability, our OPN architecture differentiates Ciena by allowing us to address the broadest range of consumption models."

Smith singled out the WaveServer, Ciena's platform for data center interconnection, as an example of this design principle, but admitted later that it is early days for that product in terms of revenue.

Where Ciena did see the most growth was in its converged packet optical products, where revenues grew from $389 million to $435 million. Sales growth was up 30% in Central and Latin America and 60% in Asia Pacific. Direct sales to web-scale companies grew 25% over the previous quarter, and Smith said Ciena actually added two new web-scale customers in the period.


Stay up-to-date on data center strategies including connectivity in the data center connectivity section of our Data Center page here on Light Reading.

"Overall we continue to hold the number one share globally in data center interconnect market," CFO James Moylan said. "And our Waveserver product is building momentum. We have more than 30 engagements around the globe; we have a total of five customers, three of which are web-scale; and in terms of revenue, we think it's in the low tens of millions this year."

Questioned on how its Cyan acquisition is performing, Smith said Ciena's expectations are being met in that area.

"The Z-series had a total of $25 million in revenue this quarter in products and service -- it is performing as to expectations," he said. On the Blue Planet side, Smith admitted there "is not a lot of revenue, but we have proven to ourselves there is a market here, and we have a great product."

Smith said he expected the second half to be a better period for North America, with double-digit organic growth from a blend of customers including cable, web-scale, government and enterprise. But when pressed by analysts as to why Ciena isn't raising its full-year 2016 projections, the company reiterated third-quarter revenue projections in the range of $655 million to $685 million. The Ciena CEO says the expected uptick only gives the company more confidence in its earlier projections.

— Carol Wilson, Editor-at-Large, Light Reading

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