Ciena: An Always-Volatile Play On Telecom And Data Center Spending
Stephen Simpson, CFA
Stephen Simpson, CFA
Ever-Volatile Ciena Doing Well In 100G
Stephen Simpson, CFA
Stephen Simpson, CFA
Ciena Goes Back Into The Penalty Box
Stephen Simpson, CFA
Stephen Simpson, CFA
Thu, Jun. 2, 3:00 PM
Thu, Jun. 2, 10:13 AM
- Ciena (NYSE:CIEN) is up 11.9% out of the open after fiscal Q2 results where profits declined less than expected and revenue gains in Asia Pacific made up for Western declines.
- On a GAAP basis, net income fell 32%, while non-GAAP net income swelled slightly to $52.4M. Non-GAAP EPS fell to $0.34 from a year-ago $0.35.
- Gross margin rose to 44.2% from a year-ago 43.8% and the previous quarter's 43.9%.
- Revenue by segment: Networking platforms, $512.2M (up 1.9%); Software and Software-related services, $30.5M (up 27.6%); Global services, $98M (up 3.2%).
- By region: North America, $395.5M (down 0.4%); Europe, Middle East and Africa, $96.2M (down 5.9%); Caribbean and Latin America, $57.9M (up 20.9%); Asia Pacific, $91.1M (up 22.6%).
- For its Q3, the company is guiding to revenues of $655M-$685M (in line with expectations) along with gross margin in the mid-40s and opex of about $225M.
- Press Release
Thu, Jun. 2, 9:15 AM
Wed, Apr. 27, 5:41 PM
- Infinera (NASDAQ:INFN) has guided on its Q1 call for Q2 revenue of $255M (+/- $5M) and EPS of $0.17 (+/- $0.02), below consensus estimates of $272.2M and $0.22.
- The optical transport hardware vendor reports seeing "spending lumpiness" and uncertain investment timings among some clients. Rival Ciena (NYSE:CIEN) issued soft guidance in March, while blaming macro pressures and EMEA weakness. Juniper and Ericsson, which also have strong telecom capex exposure, have provided disappointing numbers this month.
- Infinera is now down 15.2% after hours to $13.20, after initially falling moderately in the wake of its mixed Q1 results. Ciena, which often goes in the same direction as Infinera, hasn't yet traded after hours since Infinera issued its guidance.
Tue, Mar. 22, 3:08 PM
- Infinera (INFN -6.7%) is off sharply after Microsoft (the world's #2 public cloud service provider) stated at the optical networking industry's annual OFC conference it prefers short-reach data center interconnect (DCI) modules that are built directly into Ethernet switches, rather than standalone DCI systems such as Infinera's Cloud Xpress.
- Microsoft's remarks came as chipmaker Inphi (IPHI +4.4%) unveiled a silicon photonics-based 100G transceiver for 80km DCI modules. Microsoft worked with Inphi to develop the solution, and provided a positive quote for Inphi's PR: "The ability to provide high bandwidth connectivity in a form factor that is smaller, uses less power and is less expensive than today's solutions is a benefit to Microsoft and the cloud market in general."
- Cloud Xpress has been expected to be a major growth driver for Infinera in the coming years, as major Web/cloud service providers continue rapidly building out their data center infrastructures. Infinera stated on its Q4 call (transcript) it had 20 Cloud Xpress invoice customers at the end of 2015, including "a number" of large Internet firms.
- While Infinera sells off, Ciena (CIEN +3.4%), which derives a large % of its sales from packet-optical systems that integrate Ethernet switching and optical transport functions, is rallying. Ciena entered the standalone DCI market last year through its Waveserver platform.
- MKM is defending Infinera, arguing today's selloff is an overreaction and that the Microsoft news was mostly priced in.
Thu, Mar. 3, 12:53 PM
Thu, Mar. 3, 10:34 AM
- In addition to missing FQ1 sales estimates (while beating on EPS), Ciena (CIEN -20.6%) is guiding for FQ2 revenue of $615M-$645M, mostly below a $644.6M consensus. The company also used its earnings call to lower its FY16 (ends Oct. '16) revenue growth guidance to 5-8% from 8%-9%; consensus is for 8.4% growth.
- Fellow optical networking hardware firms Infinera (INFN -4.7%) and Adtran (ADTN -2.5%) are also lower. As are optical component firms NeoPhotonics (NPTN -9%), Fabrinet (FN -2.4%), Oclaro (OCLR -3.1%), and Lumentum (LITE -2.1%). NeoPhotonics jumped yesterday in response to strong earnings/guidance; Fabrinet and Oclaro did the same in February.
- Ciena reports seeing "some recent volatility in the broader macroeconomic environment." On the call, the company mentioned its EMEA sales are soft, and that it's making changes to deal with the issue.A strong dollar is also cited as a headwind. Ciena nonetheless expects to post above-market growth outside of EMEA.
- Ciena's top-line performance: Networking platforms revenue (packet-optical systems, optical transport systems, and Ethernet switches) rose 9% Y/Y in FQ1 to $449.5M. Software and software-related service revenue (inc. the Blue Planet SDN platform) rose 8% to $25.4M. Global services revenue rose 7% to $98.2M. One customer (AT&T?) accounted for 22% of revenue, and the U.S. overall accounted for 63.7% of revenue.
- Financials: Adjusted gross margin was 44.7% vs. 44.9% in FQ4 and 44.1% a year ago; GM is expected to be in the mid-40s once again in FQ2. Controlled spending helped adjusted op. margin rise 150 bps Y/Y to 8.3%. Ciena ended FQ1 with $995M in cash and $1.26B in long-term debt.
- JPMorgan is defending Ciena: The firm considers the FY16 revenue guidance cut reasonable given macro pressures, and thinks shares don't deserve to sell off more than a few percent. (source: Notable Calls)
- Ciena's FQ1 results, earnings release
Thu, Mar. 3, 9:15 AM
Wed, Feb. 3, 1:32 PM
- Though the Nasdaq is down 1.5%, many telecom equipment and optical component firms are rallying after network test equipment/telecom software provider Viavi (VIAV +17.6%) and optical component vendor Oclaro (OCLR +11.4%) beat calendar Q4 estimates and issued strong Q1 guidance.
- The list includes optical networking hardware firms Ciena (CIEN +3.9%) and Infinera (INFN +4.9%), component vendors Finisar (FNSR +5.3%) and Alliance Fiber (AFOP +2.2%), Wi-Fi hardware provider Ruckus (RKUS +3.5%), and VoIP and 4G signaling hardware/software firm Sonus (SONS +2.5%).
- Component maker NeoPhotonics (NPTN +14.7%) is posting double-digit gains, aided by an upgrade to Strong Buy from Raymond James. RJ says its checks point to strong sales fueled by Chinese demand and 100G metro optical buildouts.
- Oclaro guided for calendar Q1 (FQ3) revenue of $97M-$100M, soundly above a $90M consensus. The FQ2 beat was fueled by a 21% Y/Y increase in 100G product sales (53% of total revenue), which offset a 7% drop in sales of 10G and lower-speed products (35% of revenue). (earnings release)
- Viavi's beat was aided by a 5.7% Y/Y sales increase for the company's core network enablement (test instrument) business. The unit delivered Y/Y sales growth for the first time in five quarters. (earnings release)
- Viavi and Oclaro's numbers came shortly after optical component contract manufacturer Fabrinet soared in response to an FQ2 beat and strong FQ3 guidance. Fabrinet's revenue from 100G programs nearly tripled Y/Y in FQ2.
Tue, Jan. 12, 10:42 AM
- Believing the company is undervalued relative to peers and that its recent selloff spells a buying opportunity, Morgan Stanley's James Faucette has upgraded Ciena (NYSE:CIEN) to Overweight. His target has been cut by $2 to $23.
- Faucette: "Many 100G metro builds are set to kick-off in 2016, with major investment lasting into 2018. We would expect Ciena's revenue and EPS growth to accelerate as this upgrade gains strength...with the macro concerns that have sent the stock down an additional 10 percent since January 1st, we now think that the stock is attractive."
- He adds improved operational efficiency could also boost Ciena's bottom line. High customer concentration - AT&T and Verizon have long accounted for a major % of sales - is seen as a risk.
- Jefferies upgraded Ciena on Dec. 21, while citing a reasonable valuation and several top-line catalysts. Shares nosedived on Dec. 10 in response to the soft FQ1/FY16 guidance accompanying Ciena's FQ4 beat.
Dec. 10, 2015, 2:11 PM
- Ciena (CIEN -16.8%) has tumbled after issuing light FQ1 guidance to go with an FQ4 beat. In addition, the optical networking hardware vendor has guided for 8%-9% FY16 (ends Oct. '16) revenue growth, below a 13.8% consensus.
- With Ciena's outlook raising new fears about telecom capex (under pressure for a while), rival Infinera (INFN -3.3%) is also off, as are optical component vendors Lumentum (LITE -2.2%) and Alliance Fiber (AFOP -1.9%), VoIP/4G signaling infrastructure provider Sonus (SONS -1.6%), and network test equipment/software provider Viavi (VIAV -2%). The Nasdaq is up 0.7%.
- Northland Securities' Tim Savageaux has gone contrarian and upgraded Ciena to Outperform. He notes the company's FY16 outlook still implies an acceleration in organic sales growth (accounts for the Cyan acquisition) to over 7% from FY15's 3%, and calls the selloff an attractive entry point for buying an industry leader.
- Wells Fargo's Jess Lubert (Outperform rating) is also defending Ciena. "While we are disappointed by Ciena’s FQ1 and F2016 outlook, we sense the company’s forecast likely embeds conservative assumptions surrounding the Cyan business and the timing of revenue recognition on several large opportunities. That said, with Ciena having secured 100G metro deployments with many of the world’s largest carriers and likely to see improved mix further benefit margins, we remain positive regarding the company’s 2016/2017 prospects and see the potential for the current forecast to prove conservative if execution remains strong."
Earnings/guidance details: Ciena's FY16 op. margin is expected to be in a range of 11%-12% vs. 10.9% in FY15 before rising to ~15% in the next 3-4 years. Gross margin (non-GAAP) is expected to be in the mid-40s; it was at 44.9% in FQ4, -40 bps Q/Q and +700 bps Y/Y.
The company had two 10%+ customers in FQ4 (possibly AT&T and Verizon) that collectively made up 29.6% of revenue. Non-U.S. customers were 34.5% of revenue, and Cyan contributed $84.4M (12% of total revenue), primarily via its Z-Wave packet-optical (integrated optical networking/Ethernet switching) platform. Altogether, packet-optical products made up 70% of revenue, packet networking (Ethernet switches) 9.2%, optical transport 2.4%, and software/services 18.4%. (earnings release)
Dec. 10, 2015, 12:46 PM
Dec. 10, 2015, 9:14 AM
Dec. 10, 2015, 8:22 AM
Oct. 28, 2015, 1:42 PM
- Optical component vendors NeoPhotonics (NPTN +12.6%), Oclaro (OCLR +9.4%), Viavi (VIAV +6.9%), Finisar (FNSR +3.8%), Alliance Fiber (AFOP +4%), and Fabrinet (FN +3.1%) are rallying after optical transport hardware vendor Infinera (INFN +14.6%) beat Q3 estimates and issued strong Q4 guidance. Infinera rival Ciena (CIEN +3.4%) hit yesterday by a bearish Off Wall Street report, is also doing well.
- For Oclaro, the shoe is now on the other foot: Infinera rallied last week after Oclaro pre-announced strong calendar Q3 sales.
- On the earnings call (transcript), CEO Tom Fallon stated Infinera saw "a substantive increase" in sales of its Cloud Xpress data center interconnect platform. Cloud Xpress customers now stand at 14 (up from 12 as of July), and growing machine-to-machine traffic within data centers is expected to boost demand for 100G interfaces. Infinera's core long-haul system sales were also healthy.
- Fallon did admit Infinera is seeing "some conflicting signals" regarding market demand. "On one hand, we are seeing some pockets of slightly softening demand. On the other, we're seeing positive indications in the industry, such as lead-times extending for optical components and continued capacity expansion from cloud providers." The optical component remarks might be contributing to today's rally in component makers.
- Needham's Alex Henderson, who upgraded Infinera earlier this month, is reiterating a Buy rating today. "Infinera reported a strong quarter and offered a strong guide in its first quarter with Transmode partially in the base and fully in the CY4Q guidance. Negative commentary on the Street on INFN and CIEN regarding industry price pressure has set-up a solid entry point and we expect investors will take advantage of this recent weakness."
Oct. 27, 2015, 10:05 AM
- Independent research firm Off Wall Street has issued a Strong Sell rating for Ciena (NYSE:CIEN). The optical transport/packet-optical hardware vendor's shares have fallen below $24.
- RBC upgraded Ciena post-earnings last month, while Deutsche downgraded. Shares currently trade for 14x an FY16 (ends Oct. '16) EPS consensus of $1.61.
Ciena Corp. engages in the provision of network and communication infrastructure. It operates through the following segments: Converged Packet Optical, Packet Networking, Optical Transport and Software and Services. The Converged Packet Optical segment develops and sells optical processors,... More
Industry: Communication Equipment
Country: United States
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