Amid troubling capex news from its two largest customers, Ciena Thursday managed to beat analysts' expectations for fiscal fourth-quarter revenue, but also swung to an unexpected net loss for the quarter.
The company reported fourth-quarter revenue of $591 million, falling within its own previously estimated range of $570 million to $610 million, but beating the analysts' average estimate of $589 million.
However, the vendor disappointed Wall Street, which had expected a profit for the quarter. Instead, Ciena Corp. (NYSE: CIEN) reported a non-GAAP (after one-time costs) net loss of $8.2 million. Its GAAP net loss, including all charges and variables, was $30.7 million. (See Ciena Meets Revenue Estimates, Reports Q4 Loss.)
Ciena Corp. (NYSE: CIEN) did its best to prove that disappointment will be short-lived. CEO Gary Smith said on the company's earnings call this morning that Ciena is demonstrating its ability to broaden its market opportunities geographically and across industry borders, covering not only traditional carriers, but "web-scale" content companies, cable TV MSOs and others.
"Most important to Ciena's outlook for 2015 and beyond is that we're uniquely positioned to serve both the global Tier 1 operators and web-scale content companies," he said. "Diversification across both these markets is critical to future success."
Notably, Ciena said the percentage of total revenue it gets from its two largest customers, believed to be AT&T and Verizon, declined during the fourth quarter from 29.2% to 26.2%. Ciena officials said that percentage will continue to drop, but that continued diversification of opportunities will lead to revenue growth in the fiscal first quarter of 2015 and ongoing. Revenue is expected to be in the range of $540 million to $570 million for the current quarter, not surprising, since the fiscal first quarter is typically Ciena's weakest.
Though Ciena is intent to shake the perception that it relies too much on AT&T and Verizon, the two carrier giants together continue to cause dark clouds to form over the vendor community. AT&T recently said it will spend $3 billion less next year than it did this year, and Verizon said it would cut wireline capex, though it is planning to increase wireless capex. On the positive side, AT&T this week confirmed Ciena as a supplier for its Domain 2.0 program, but the carrier has said that cloud-based strategy will lead in part to lower future capex. (See AT&T's Mexican Capex Dance and AT&T Adds Brocade, Ciena, Cisco to Its SDN, NFV Program.)
The web giants also are causing some uncertainty in the market, as vendors excited about the opportunity have hinted at lumpy spending patterns by that group. Smith said Ciena has not seen the lumpiness, and that it has adjusted quickly to respond to the faster purchasing cycles and delivery schedules of the web companies as compared to traditional carriers.
Shareholders clearly believe that Ciena is coping well in an increasingly unpredictable market, as its share price is up 5.5% at $17.90 in early trading Thursday, despite the unexpected loss.
— Dan O'Shea, Managing Editor, Light Reading