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Ciena's Q1 Signals a Tough Start to 2016Ciena's Q1 Signals a Tough Start to 2016

Optical vendor's numbers for its fiscal first quarter, and its forecast for the second quarter, suggest tight capex purse strings at the major telcos.

March 3, 2016

2 Min Read
Ciena's Q1 Signals a Tough Start to 2016

Ciena reported its fiscal first-quarter financials early Thursday and they might just set off some alarm bells in the vendor community.

The optical, Ethernet and SDN software specialist's revenues for the three months to January 31, 2016, came in at $573.1 million, slightly lower than the $576.3 million expected (on average) by the financial analyst community, while its adjusted earnings (after one-time costs) were slightly higher than expected, at $0.18 per share.

Most of its revenues -- 63.7% of the total, or $365 million -- came from the US market, where it is a significant supplier of optical transport technology to the Tier 1 operators, particularly its largest customer AT&T Inc. (NYSE: T).

But the company's outlook for its fiscal second quarter, which runs from February through the end of April, might be a cause for broader market concern, as it expects revenues in the range of $615 to $645 million, while Wall Street had been expecting (on average) $644.6 million.

That suggests spending in the US market might be constrained currently, or at least directed towards areas other than optical and Ethernet network equipment.

Those warnings signs were picked up by the early traders: Ciena Corp. (NYSE: CIEN)'s stock is down 16% in pre-market trading to $17.38. That appeared to have a minor knock-on effect on rival Infinera Corp. (Nasdaq: INFN), which saw its stock take a 2.1% dive to $15.10 in pre-market trading.

Ciena's CEO Gary Smith, as ever, is optimistic: "Despite some recent volatility in the broader macroeconomic environment, the demand drivers for our business remain firmly in place and we are well positioned to translate our market leadership into continued growth and profitability this fiscal year," he stated in the company's official earnings press release.

In general, market drivers such as metro 100G investments, to support rising video and data traffic volumes, and data center interconnection should help to boost Ciena's revenues through the rest of 2016 and help it to achieve year-on-year sales growth, though maybe not as high as the 8% or higher that analysts had been expecting before today's announcement.

— Ray Le Maistre, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, Editor-in-Chief, Light Reading

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