Ciena Beats; Shares Slide on Weak Outlook

Networking gear maker Ciena (CIEN) reported Thursday a more than doubling of fiscal Q4 net income to $30.4 million, or $0.30/share, with adjusted EPS of $0.48 easily beating Street estimates of $0.42/share. Revenues climbed 35% to $216.2M, compared to analyst expectations of $211.3M. "By all accounts, 2007 was a momentous year for Ciena. In addition to achieving 38% annual revenue growth and delivering strong financial performance, we established ourselves as a leader in the emerging converged Ethernet infrastructure space," CEO Gary Smith said in a statement. Ciena's quarterly gross margin improved to 56.3% vs. 51.4% last year.

Despite estimate-beating numbers, shares dropped sharply after the company issued weak guidance. Looking ahead to 2008, CIEN expects 20% revenue growth; consensus estimates were for 22% revenue growth. "We view the outlook as disappointing," said Raymond James analyst Todd Koffman. "That said, it appears the company is being conservative." Even more disconcerting, Ciena forecast 5% Q1 revenue growth, vs. Street estimates of 2.4%, implying the company is particularly concerned about the latter part of the year. Smith addressed the issue in the company's conference call. "We've got better visibility in (the first and second quarters), and I think it's a function of the further out you go, you have less visibility to it," he said (transcript). In a subsequent interview, Smith noted Ciena's 38% revenue growth in 2007 far exceeded the company's initial 20% guidance.

Ciena said it suffered $13M in SIV-related losses. It also named James E. Moylan to succeed outgoing CFO Joseph Chinnici. Shares of Ciena were down 11.8% in midday trading. Ciena competes with Alcatel-Lucent (ALU), Cisco (CSCO) and Nortel (NT).

Sources: Press release, Bloomberg, MarketWatch, Reuters
Additional Reading: Goldman Removes Ciena From List Of Favorite Tech Growth Stocks • The Future Looks Bright For Ciena Corporation

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Comments

[Lisa:]

What's Ciena doing in SIVs???

2007 Dec 13 04:21 PM