Ciena Suffers Margin Squeeze in Q4

Ciena reported a strong end to its fiscal year in terms of sales, but its margins raised a few eyebrows and sent its stock slipping Thursday. (See Ciena Reports Q4 Revenues of $583.4M .)

The optical and Ethernet equipment specialist reported revenues of $583.4 million for the three months ended October 31, up 25.3 percent from a year ago. Its net loss was $9.8 million, better than the $38.8 million net loss of a year earlier.

The vendor's adjusted, or non-GAAP, net profit (after one-time costs) also improved to $18.3 million from an adjusted loss of $6.7 million a year ago. But that adjusted profit was not as good as Wall Street was expecting, and the company's gross margin slipped to 40.8% from 42.7% a year earlier.

That's not a one-off either. Ciena Corp. (NYSE: CIEN) noted that it expects the gross margin for its fiscal first quarter ending January 2014 to be in the "low 40s range," while its revenues are expected to be in the range of $515 million to $545 million.

That margin pressure didn't please investors, as Ciena's share price sank more than 7% to $21.19.

CEO Gary Smith is expecting revenues to rise again in fiscal 2014, and seasoned telecom equipment sector analysts had been expecting Ciena to further build on its 100G momentum in North America and even start to pick up more of such business in Europe. Now, though, there may be concerns about the margin value that business can bring.

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— Ray Le Maistre, Editor-in-Chief, Light Reading

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