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
Sep. 11, 2015, 12:45 PM
- Finisar (FNSR -18.4%) has plunged to its lowest levels since 2012 after missing FQ1 estimates, providing soft FQ2 guidance, and announcing chairman Jerry Rawls is replacing Eitan Gertel as CEO.
- Optical component/module peers Alliance Fiber (AFOP -4.6%), Lumentum (LITE -2.3%), and Oclaro (OCLR -6%) are also off, as are equipment vendors Infinera (INFN -3.8%), Ciena (CIEN -2.8%), Adtran (ADTN -2.3%), and Calix (CALX -2.5%). The Nasdaq is nearly flat.
- During Finisar's earnings call (transcript), Rawls noted his company continues to "see a high level of competition," and is aiming to cut operating expenses to ~20% of revenue from FQ1's 21.8%. CFO Kurt Adzema mentioned wireless and legacy 100G datacom component sales were soft in FQ1, and that Finisar is now seeing "some lumpiness" for 40G data center sales.
- Adzema insisted the competition (much of it around low-end/10G products) is business as usual. "The lower end products always [face] competition from non-tier 1 companies and in some period of time, it just takes whether it’s a one year or a three year or whatever the period, tier 2 competitors always catch up." Rawls promised 25G/100G Ethernet data center upgrade cycles would drive growth next year.
- MKM and B. Riley have downgraded Finisar to Neutral, and several other firms have cut targets. MKM's Michael Genovese cites datacom competition/price pressure, and states he's "becoming less convinced that there is an easy path to industry consolidation that will help alleviate ... significant Optical component industry challenges,"
- At the same time, Genovese defends Ciena, Infinera, and Lumentum (formerly JDS Uniphase's component unit). "Ciena and Infinera actually slightly benefit from more [component] competition and lower prices since they are customers ... we believe the negative revisions in Finisar's outlook are much more on the Datacom side than on the Telecom side ... Finisar is an incumbent that derives 75% of overall revenues from Datacom, while Lumentum is a relatively new challenger with only 20% of revenues from Datacom ... we are much more confident in the demand and pricing environments for 100G Telecom (Metro and [long-haul]) components than we are for Datacom, and Lumentum has significantly more exposure to 100G Telecom than Finisar."
Sep. 4, 2015, 9:28 AM
- Deutsche has downgraded Ciena (NYSE:CIEN) to Hold after the company posted mixed FQ3 results. Shares have dropped to $22.46 premarket. Nasdaq futures are off 1.4%.
- Several firms provided positive reactions yesterday. Wells Fargo's Jess Lubert (Outperform rating): "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 confident in the company’s ability to deliver C2016 EPS of at least $1.70 following FQ3 results. As such, we would recommend investors take advantage of any weakness on Ciena’s softer than expected FQ3 sales results to buy the stock, which we believe remains attractively valued at less than 14X our C2016 EPS estimate."
- Prior Ciena coverage
- Update: Deutsche's Brian Modoff states checks point to weak U.S. telco and cable demand. "Our latest round of channel checks correlate well with color we gathered from our post call with CIEN on the potential for modest headwinds to carrier network upgrade activity at the US telcos and cablecos (outside of T; where CIEN is seeing strength in 100G metro and in broadband fiber access). Infinera (NASDAQ:INFN), we note, has revenue exposure at the major Web 2.0 and Cloud portals, ISPs, Telcos such as CenturyLink and a handful of cablecos, and “zero” exposure currently at T, Verizon Communications, etc. We therefore prefer INFN to play the double-digit intensity in 100G Datacenter Optical rollouts and 100G in the Metro and Long Haul during 2H15 and into FY16/17
Sep. 3, 2015, 12:16 PM
- Initially down sharply following its mixed FQ3 results, Ciena (CIEN +2.8%) has reversed course.
- Possibly helping: On the earnings call, CEO Gary B. Smith downplayed the carrier project delays blamed for Ciena's FQ3 sales miss, stating overall demand remains healthy and that top customer AT&T isn't among the delaying firms. ""It is three or four carriers, and I think it is temporary in nature."
- Also: Ciena says it now expects FY15 (ends in October) op. margin to exceed 10%, predicts the Cyan acquisition will be accretive to FQ4 results, and states the revenue contribution for Cyan's packet-optical hardware and SDN software is "strong." Adjusted op. margin rose 170 bps Y/Y in FQ3 to 11.8%.
Ciena's FQ3 results, guidance/details/COO announcement
Sep. 3, 2015, 10:00 AM
- Ciena (NYSE:CIEN) has sold off after missing FQ3 revenue estimates and beating on EPS. The company suggests "short-term revenue headwinds related to the timing of network implementations at certain large service provider customers" are to blame for the top-line miss.
- FQ4 guidance is for revenue of $665M-$700M, above a $662.8M consensus. However, the outlook reflects a full quarter's contribution from the Cyan acquisition (closed in early August), something that might not be accounted for by all analyst estimates.
- Along with the numbers, Ciena has appointed Francois Locoh-Donou, the SVP of its Global Products Group since 2011, to the newly-created position of COO, effective Nov. 1. Locoh-Donou will "assume responsibility for Ciena's Global Field Organization, including the global sales and services functions, while retaining his existing responsibility for research and development, product line management, supply chain and network integration functions."
- CEO Gary B. Smith states the COO position was "created to facilitate greater organizational alignment between our product and customer teams." The move comes shortly after Ciena announced sales chief Philippe Morin is stepping down.
- Segment performance: FQ3 converged packet optical (integrated Ethernet/optical networking gear) revenue +7% Y/Y to $408M. Packet networking (Ethernet switches) -18% to $57.2M. Optical transport -44% to $17.5M. Software/services -1% to $120.2M. The U.S. was 59.8% of revenue, and one customer (AT&T?) made up 20% of revenue.
- Financials: Boosting EPS: Adjusted gross margin was 45.3%, up 90 bps Q/Q and 100 bps Y/Y, and above guidance of 43%; FQ4 guidance is at 44%. Also helping: Adjusted operating expenses fell 2% Y/Y to $202.1M. Ciena ended FQ3 with $927M in cash/investments, and $1.46B in long-term debt.
- FQ3 results, PR
- Update (12:17PM ET): Ciena is now up 3% post-earnings. Earnings call commentary could be helping.
Aug. 26, 2015, 11:05 AM
- "Our checks indicate that Ciena (NYSE:CIEN) has taken share from Fujitsu and Coriant at its top customer AT&T for its long haul and metro deployments, and will continue to do so," writes Raymond James' Simon Leopold, upgrading to Outperform. "We see upside from improved diversity, specifically with non-telco customers, which drove strength in F1Q15 at over 30% of sales."
- Leopold also sees IP networking initiatives from the likes of Comcast acting as a positive, and expects demand from Web/cloud customers to pick up again, aided by the ramp of Ciena's Waveserver data center interconnect solution (competes against Infinera's Cloud Xpress). The recent Verizon 100G metro deal is considered a nice reference win, but "a modest sales contributor."
- Separately, Ciena has announced Korea's SK Telecom is deploying its new 5430 packet-optical (integrated Ethernet/optical networking) system. Ciena claims the 5430 delivers "up to five times more port density, four times switching capacity and 60 percent reduction of power consumption per switched Gb/s" than the prior-gen 5410.
Aug. 20, 2015, 12:09 PM
- With investors fleeing to safety and asking questions later - Chinese macro concerns have been playing a role - tech stocks with high betas (and sometimes also high multiples and big 2014/2015 gains) are among the biggest losers as the S&P drops 1.1%, and the Nasdaq 1.7%.
- Noteworthy decliners include action camera leader GoPro (GPRO -6%), security tech plays Palo Alto Networks (PANW -4.9%), FireEye (FEYE -4.5%), CyberArk (CYBR -5.7%), Qualys (QLYS -5.1%), Imperva (IMPV -6%), and Vasco (VDSI -4.2%), and driver-assistance tech leader Mobileye (MBLY -6%).
- Others include optical networking hardware vendors Ciena (CIEN -5%) and Infinera (INFN -7.3%), optical component vendors NeoPhotnics (NPTN -5.9%) and Oclaro (OCLR -6.7%), data management software firm Varonis (VRNS -5.5%), programmatic ad-buying platform Rocket Fuel (FUEL -7.4%), DNS/IP address hardware vendor Infoblox (BLOX -5.1%), haptic tech developer Immersion (IMMR -6.2%), and solar microinverter maker Enphase (ENPH -7.2%).
- Many Chinese tech stocks are also seeing heavy losses.
Jul. 23, 2015, 2:56 PM
- Application delivery controller/security hardware vendor F5 (FFIV +6.9%) beat FQ3 estimates on the back of strong software sales, and provided above-consensus FQ4 EPS guidance (revenue was in-line). With growing 100G long-haul optical deployments serving as a tailwind, optical networking hardware vendor Infinera (INFN +9.6%) beat Q2 estimates and provided strong Q3 guidance.
- Also: Optical component vendor Alliance Fiber (AFOP +16%) beat estimates and offered healthy guidance. Strong datacom component demand from cloud service providers was cited.
- A slew of telecom/networking equipment, component, and chip vendors are higher on a day the Nasdaq is down 0.4%. The list includes Infinera rival Ciena (CIEN +1.6%), F5 rival Radware (RDWR +3.3%), and Alliance Fiber peer NeoPhotonics (NPTN +4.7%). Others include Ciena acquisition target Cyan (CYNI +1.8%) and chipmakers Cavium (CAVM +3.6%), PMC-Sierra (PMCS +3%), EZchip (EZCH +2.8%), and InPhi (IPHI +3.7%).
- Broader gains for chip stocks - the Philadelphia Semi Index is up 1.7% after selling off hard yesterday - are likely helping the chipmakers. Cisco, meanwhile, is up 2.2% after striking a deal to sell its share-losing set-top unit to Technicolor.
- During F5's earnings call, new CEO Manny Rivelo stated F5 now leads the virtual (software-based) ADC market, which has sometimes been seen as a major long-term threat to its ADC hardware business, and noted the company saw a 20% Y/Y increase in its deferred revenue balance (driven by services/subscription growth) to $743M. He also disclosed sales chief Dave Feringa is stepping down on Oct. 1; his successor will be named shortly.
- On Infinera's call, CEO Tom Fallon mentioned the company has now invoiced 12 customers for its new Cloud Xpress data center interconnect platform, up from 7 three months ago. For now, long-haul optical still makes up over 90% of revenue - Cloud Xpress growth, the pending launch of a metro aggregation product, and (provided it's approved) the Transmode acquisition should change that. 3 customers accounted for over 10% of Q2 revenue.
Jun. 4, 2015, 2:07 PM
- Though the Nasdaq is down 1%, Ciena (CIEN +1.4%) remains higher after beating FQ2 estimates on the back of strong packet-optical (integrated Ethernet/optical networking) hardware sales. FQ3 revenue guidance is at $610M-$640M, in-line with a $632.2M consensus.
- Financials: Boosting FQ2 EPS: Gross margin was 44.4%, +30 bps Q/Q and +130 bps Y/Y, and above guidance of 42%-43%; FQ3 GM guidance is at 43%. Also helping: Operating expenses (non-GAAP) only rose by $1.6M Y/Y (less than 1%) to $207.9M. On a GAAP basis, R&D spend totaled $105.2M, sales/marketing $82.5M, and G&A $30.3M. Adjusted op. margin rose to 10.9% from 6.8% in FQ1 and 6.2% a year ago.
- Business performance: Converged packet optical revenue (69.6% of total) +21% Y/Y to $432.9M. Packet networking (Ethernet switches) -20% to $53.3M. Optical transport -44% to $16.5M. Software/services +11% to $118.9M.
- Georgaphic/customer performance: North America was 63.9% of revenue (U.S. was 59.1%), EMEA 16.4%, Asia-Pac 12%, and Caribbean/Latin America 7.7%. AT&T accounted for 19% of sales, and was the sole 10%+ customer. UBS likes the fact North American sales rose 20% Q/Q in spite of AT&T revenue (recently under pressure) remaining roughly flat.
- Shares made a new 52-week high of $25.49 this morning before pulling back a bit.
- FQ2 results, PR
May 4, 2015, 12:45 PM
May 4, 2015, 9:16 AM
May 4, 2015, 7:56 AM
- Cyan (NYSE:CYNI) +29.8% premarket after Ciena (NYSE:CIEN) agrees to acquire the networking software company in a cash and stock deal valued at ~$400M; the $4.75/share bid is a 30% premium to CYNI's Friday closing price.
- Ciena says the addition of Cyan "accelerates the availability of a complete solution for our customers to deliver virtualized networks and services on-demand."
- CYNI's stock had run up 46% YTD through Friday.
- Also: Cyan beats by $0.01, beats on revenue
Apr. 14, 2015, 10:17 AM
- Optical networking hardware vendors Ciena (CIEN +5.7%) and Infinera (INFN +2.4%) are higher after Nokia stated it's in talks to merge with Alcatel-Lucent, sparking hopes more telecom equipment industry M&A could be on tap. Microcaps MRV Communications (MRVC +9.7%) and Zhone (ZHNE +6.9%) are also faring well.
- Ciena and Infinera both compete against Alcatel in the optical transport/switching market. The Street might be betting Ericsson or another rival will respond to a Nokia/Alcatel deal by making an optical acquisition.
- Infinera (rallying less than Ciena) is a week removed from making a $350M+ bid for Swedish metro optical hardware vendor Transmode. Analyst reactions to the deal, which stands to significantly increase Infinera's metro market reach and European customer base, have been fairly positive
Mar. 27, 2015, 3:12 PM
- Today's notable tech gainers include next-gen firewall leader Palo Alto Networks (PANW +3.5%), touchscreen tech developer UniPixel (UNXL +5.9%), solar microinverter leader Enphase (ENPH +5.8%), optical transport/switching hardware vendor Infinera (INFN +3.8%), telecom service/analytics provider Neustar (NSR +4.4%), and Chinese online classifieds leader 58.com (WUBA +4%). The Nasdaq is up 0.3%
- There are relatively few major decliners today. The group includes Infinera rival Ciena (CIEN -4.5%), Chinese sports lottery site 500.com (WBAI -5.3%), and Chinese online video leader Youku (YOKU -3.4%).
- Palo Alto is adding to Thursday gains seen amid a broader cybersecurity stock rally. Likewise, Enphase gained on Thursday following rival SolarEdge's IPO, Neustar gained after announcing a $150M buyback, and Infinera gained following a bullish MKM note.
- Ciena is reversing the Tuesday gains seen after Stifel reported the company's share of a major Verizon 100G metro contract (has been officially announced) could be larger than expected. 500.com is giving back major Thursday gains; yesterday morning, SA Instablog author/former i-banker MNS Global reported hearing Chinese authorities are thinking of indefinitely extending recently-placed bans on online sports lottery sales, after uncovering corruption.
- Previously covered: EMC, HP, Voxeljet, Skyworks, SuperCom, Stratasys, Qunar, Pandora, SanDisk
Mar. 24, 2015, 11:29 AM
- Like others, Stifel reports Ciena (NYSE:CIEN) and Cisco (NASDAQ:CSCO) are expected to share a huge Verizon 100G metro optical contract. However, while others have reported Cisco will get ~2/3 of the contract, Stifel's checks indicate the Cisco/Ciena split hasn't been determined; the firm believes "both vendors will start on an equal footing," and that Ciena might even get a majority of the deal.
- Ciena is expected to supply a platform that's similar to its 6500 series packet-optical (integrated Ethernet switching/optical networking) hardware, and which supports OTN switching. Stifel thinks Ciena, whose 6500 series is already used in Verizon's 100G long-haul network, could get over $100M in 2016 revenue from the metro deal. Cowen has estimated the total contract opportunity could be worth $200M-$300M over two years.
- Optical component vendor NeoPhotonics (NPTN +4%), which received 15% of its 2014 revenue from Ciena (trailing only Huawei's 38%) and has healthy 100G exposure, is also rallying. Its shares are now up 104% since a Q4 beat was posted on March 3.
- Update: Verizon has confirmed Ciena and Cisco have won the deal. No word on the split between the companies.
Mar. 16, 2015, 3:19 PM
- Though the Nasdaq is up 1.1%, major tech decliners are roughly on par with major gainers today.
- Notable gainers include telecom equipment vendor Ciena (CIEN +3.9%), data center owner CyrusOne (CONE +4.6%), optical component maker NeoPhotonics (NPTN +6.1%), software outsourcing firm Luxoft (LXFT +7.7%), supply chain software vendor Manhattan Associates (MANH +4.2%), and Chinese game developer NetEase (NTES +3.7%).
- Notable decliners include leading Chinese online video platform Youku (YOKU -4%), 4G router/M2M module maker Novatel (MIFI -5.5%), security hardware/software vendor KEYW Holding (KEYW -5.3%), Chinese online retailer LightInTheBox (LITB -8.7%), Chinese online real estate plays E-House (EJ -4.7%) and Leju (LEJU -5.3%), seismic tech provider Geospace (GEOS -7.5%), and U.S. solar installer Vivint (VSLR -4.3%).
- CyrusOne, Luxoft, and Manhattan Associates are making new 52-week highs. Geospace's decline comes as crude oil falls to fresh 6-year lows. The Chinese decliners are failing to get a boost from pro-stimulus remarks from premier Li Keqiang (they've lifted many other Chinese names).
- Previously covered: Xilinx, Neonode, MoSys, Superconductor Technologies, Himax, Alibaba, Avago, Qorvo, King Digital, iDreamSky, MicroVision
Feb. 6, 2015, 1:53 PM
- Cyan (NYSE:CYNI) has gradually soared today on volume of 169K shares (above a 3-month daily average of 126K).
- No news has hit the wires to explain the move. The packet-optical hardware/SDN software vendor also rose sharply on Tuesday, and is a month removed from hiking its Q4 guidance. Full Q4 results arrive on Feb. 18.
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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