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Ciena Fiscal Q3 Buoyed by 'Web-scale' Sales as Verizon 100G Project Ramps

Ciena's CEO proclaimed that the company had its "best quarter ever" for sales to web services firms as the optical vendor reported an 11.2% year-on-year increase in revenues to $670.6 million for its fiscal third quarter.

Non-GAAP (adjusted) earnings for the quarter that ended July 31 came in at $67.6 million, or $0.42 per share, slightly better than the $0.38 that analysts, on average, had expected.

Ciena is predicting revenue of between $700 million and $730 million for its fiscal fourth quarter, which ends in October.

Those numbers, plus the outlook for the fiscal fourth quarter, sent Ciena's share price up by just more than 8% Thursday, ending the day at $23.17.

Not surprisingly, Ciena's CEO, Gary Smith, was in chipper mood during the company's earnings call Thursday.

"In addition to strong revenue from our traditional service provider customer base, Q3 was a record quarter for non-telco infrastructure at 37% of total sales," Smith said on the call. "Sales to web-scale providers made up a sizeable portion of that revenue as we had our best ever quarter with this key growth vertical."

Telco customers are still delivering the majority of Ciena's revenues, though, and there's a lot of focus currently on Ciena's traction with Verizon Communications Inc. (NYSE: VZ), for which the vendor is delivering a 100G packet-optical metro transport system. Analysts at MKM Partners note that the project is still in the early stages of ramping up but that in 2017-2019 the operator is set to spend $200 million a year on the project, of which Ciena is set to garner 50%.

And Mike Genovese at MKM believes Ciena is well placed to play a role in many such projects. "From a technology perspective, we view Ciena as the best systems player in the 100+G Metro and DCI [data center interconnect] markets," he notes in a research report issued Thursday. "While there are a multitude of vendors that can show up at the initial stage of a Tier 1 Metro RFP, Ciena is one of a very few with the technology platform and credibility to win large deployments."

— Dan Jones, Mobile Editor, Light Reading

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