Back To Black: Ciena Turns First Profit in Six Years

In what may be the turn-around story of the year, telecom equipment maker Ciena Corp. posted its first profitable quarter since 2001, good for EPS of 16 cents on net income of $13.1 million on revenues of $160 million. Consensus estimates had been for 12-13 cents a share; Ciena shares responded to the good news by jumping 11.5% to close at $27.83. And there's more good news: Ciena expects to remain profitable into 2007 giving forward EPS guidance of 19-24 cents a share for 1Q'07 (estimates are for 19 cents a share). Its profitable quarter means that Ciena closed out a fiscal year in the black for the first time since 2000, bringing in just under one cent a share. Underlying Ciena's success: its ability to adapt to a changing marketplace. Says President and CEO Gary Smith, "We've become specialists in that transition from voice to IP networks... when you have a lot of networking migration going on, that suits us." By aiding many of the big telecom player transition into high speed, fiber optic networks including AT&T and British Telecom, Ciena has managed to cap an improbable run back to profitability.
• Sources: Conference call transcripts: Ciena F4Q06 (Qtr End 10/31/06).Reuters, Light Reading, Houston Chronicle
• Related commentary: Big Profit Gooses Ciena, Ciena Products in Demand by Telcos, Can These Cash-Burning Optical Networking Companies Survive?
• Potentially impacted stocks and ETFs: Ciena Corp. (CIEN). Competitors: Juniper Networks (JNPR), Tellabs Inc. (TLAB), Sonus Networks (SONS), JDS Uniphase (JDSU), Alcatel Lucent (ALU), Nortel (NT). ETFs: PowerShares Dynamic Networking (PXQ), iShares Goldman Sachs Networking (IGN)

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