Is Ciena's Miss a Cause for Panic?

The fiscal first-quarter sales warning issued by Ciena Corp. (NYSE: CIEN) on Tuesday has more to do with a slightly longer time frame for the maturation of some deals from new customers rather than any weakness in the business, according to an analyst who follows the transport equipment vendor.

Ciena reported Tuesday that revenues in its financial first quarter, which ended Jan. 31, would be about $415 million instead of the expected $435 million to $455 million. That news sent the company's share price tumbling by 8.4 percent to $15.58 by the end of the trading day.

But MKM Partners analyst Mike Genovese stated in a research note that the lower guidance is "purely a revenue recognition issue and not an indication of weakness in underlying demand," with the shortfall in expected revenues expected to be reported (or "recognized") in following quarters.

Genovese added that "recent supply chain checks, market research and competitor guidance suggest solid demand for Ciena's products" as network operators update and upgrade their transport infrastructure.

George Notter at Jefferies & Company Inc. was more cautious, however. "While the company is attributing the miss mostly to international projects, we suspect Ciena might also have seen some softness in their North American business," wrote Notter in his reaction to Ciena's announcement.

He noted that other vendors experienced "softness" from North American carriers toward the end of 2011, and that Ciena could see an upturn in business from the likes of AT&T and Verizon in the coming months as capital spending strengthens.

However, Notter added there are still "longer-term concerns about the company’s growth rate and profitability."

Ciena's share price is down a further 1.35 percent Wednesday to $15.37.

— Ray Le Maistre, International Managing Editor, Light Reading

specsavers 12/5/2012 | 5:41:54 PM
re: Is Ciena's Miss a Cause for Panic?

Interesting about the comment on internatonal revenues being weak from Ciena. Did they not post a press release saying they were hoping to deliver a new 100G and 10G compliant network to BT by the end of 2011. So if they did was the revenue recognised, if so there could be a concern about the remaining international revenue. Alternatively they failed in their objective. Just wondered if anyone was following up on this story?

gtchavan 12/5/2012 | 5:41:54 PM
re: Is Ciena's Miss a Cause for Panic? Cause for concern for ciena no, but cause for concern for the consumers absolutely. Apple is going to come out with ipad3 in a couple of weeks and If it is 4G it will collapse their network and the consumers could start believing that there is no difference between 4G and the 3G and thus stifle the sale of 4G phones.
baznyankee 12/5/2012 | 5:41:54 PM
re: Is Ciena's Miss a Cause for Panic?

Ciena's warning is timely for a couple of reasons, imo.

First is that it came right after Feb. options expired on Friday.

Second is that it came just a week after MKM Partners suggested Ciena's revenues would come in between $450-455 million.  Their (MKM) clients are probably wondering what hit them yesterday and perhaps Genovese knows something about these revenues (delayed), as suggested by Gary Smith also.  It will also be telling whether or not Genovese will attend Ciena's dog and pony show after their quarterly earnings report in March.

photon2 12/5/2012 | 5:41:47 PM
re: Is Ciena's Miss a Cause for Panic?

BT was only one route.  Hardly affecting significant revenue.


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