More worrying for the company is that, even apart from those non-cash writedowns, it still lost more money in the quarter than expected.
The optical, Ethernet, and access equipment vendor reported revenues of $144.2 million for the three months to April 30. That's way worse than last year, even lower than the first quarter's lackluster total that precipitated job cuts, and short of the $156.7 million that financial analysts had, on average, been expecting. (See Ciena Cuts 200 Jobs as Sales Plummet.)
Table 1: Ciena Fiscal Q2 2009
|Q2 2008||Q2 2009|
|Revenues||$242.2 million||$144.2 million|
|Net income (loss)||$23.8 million||($503.2 million)|
The bulk of the net loss came from the pre-announced, non-cash, $455.7 million goodwill impairment charge that represents a significant writedown on the value of the company's assets. (See Ciena Preps Q2 Charge.)
The size of the writedown will strengthen the belief of those who reckon Ciena paid way over the odds when it bought Ethernet equipment vendor World Wide Packets for $290 million (plus $15 million in debt) early in 2008. (See Did Ciena Overpay for WWP?, PBT Key to Ciena Acquisition, and Ciena Completes WWP Buy.)
But even without the goodwill writedown and other one-time charges (such as restructuring costs), Ciena still lost $22.5 million, or $0.25 per share. Analysts had, on average, been expecting that "non-GAAP" loss to be $0.09.
The reason for the worse than expected performance? Well, it's tough out there! That was the message from CEO Gary Smith, who noted in a prepared statement that the quarter "was particularly challenging, reflecting the difficult macro and industry environment and continued delays in customer spending."
The CEO has seen some green shoots though, and expects sales to increase during the current quarter. "While recent service providers’ public commentary about expected annual capital expenditures has given the industry reason to be more optimistic about the second half of the year, our customers continue to spend cautiously, and as a result, our visibility remains limited," noted Smith. "However, based on our direct conversations with customers and supported by trends we are seeing currently in the business, including recently improved order flow, we expect to deliver sequential revenue growth in our fiscal third quarter."
Smith, though, is fond of seeing the silver lining in very dark clouds, so investors might be cautious about his view of the market. (See Ciena: Carriers Need to Spend Soon, Ciena: This Ain't No 2001!, and Ciena CEO: Slowdown Looks Shortlived.)
The company's management is set to provide further details in today's earnings conference call.
In the meantime, Ciena has been busy preparing for better times by pushing hard on new platform developments and showing off its 100 Gbit/s capabilities. (See Ciena Sending 100GE Live, Ciena Thinks Beyond PBB-TE, and Ciena Preps 'CoreDirector 2'.)
— Ray Le Maistre, International News Editor, Light Reading