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
Oct. 6, 2014, 11:30 AM
- EZchip (EZCH -12.5%), a top supplier of network processors for edge/access routers, now expects Q3 revenue of $19M, below prior guidance of $22M and a $22.6M consensus.
- CEO Eli Fruchter: "We have seen weakness in orders as well as inventory adjustments across most of our key customers that are serving the carrier networking equipment space. We believe this is a temporary slowdown, caused primarily by a weaker carrier spending environment that the market is currently going through." Like others, he's optimistic growth will soon pick up.
- Fruchter's remarks echo those from Cisco (EZchip's top customer), Juniper, Ciena, Finisar, JDS Uniphase, and several other firms. Soft North American wireline capex (led by AT&T) has especially been taking a toll on the industry.
- Several telecom equipment and component/chip suppliers are following EZchip lower. CIEN -2.8%. CAVM -2.8%. OCLR -2.7%. ZHNE -2.7%. CYNI -3.1%. AFOP -2.1%. NPTN -2.4%. OPLK -1.7%.
Oct. 3, 2014, 1:37 PM
- Adtran (NASDAQ:ADTN) expects Q3 revenue of $162M-$163M and EPS of $0.23-$0.24, below a consensus of $177.4M and $0.27.
- The company blames a bigger-than-expected Q/Q drop in European sales, and a "softer enterprise spending environment." On the other hand, sales to U.S. carriers (a weak spot for many companies as of late) grew Q/Q, and Adtran forecasts "a re-acceleration in carrier spending both in Europe and the U.S." in 2015.
- Telecom equipment peer Cyan (CYNI -5.4%) is selling off on a day the Nasdaq is up 1%. Calix (CALX -1.1%) is off moderately.
Sep. 22, 2014, 1:45 PM
- High-beta tech stocks are selling off hard as the Nasdaq registers a 1.3% decline. The selling is broad-based, with Internet, solar, and enterprise tech stocks all well-represented among the ranks of major decliners.
- Major Internet decliners: BIDU -4.7%. ANGI -7%. YELP -5.9%. AWAY -5.1%. CHGG -5.9%. GRUB -5.8%. P -5.2%. Z -4.6%. TRLA -4.8%. ATHM -7.9%. BITA -7%. DANG -5.9%. WB -5.3%.
- Solar: FSLR -4.5%. SCTY -7.5%. SPWR -4.5%. DQ -7.6%. JKS -5.5%. ASTI -6.3%. ENPH -5.5%. CSIQ -4.8%.
- Enterprise: WDAY -5.4%. GIMO -6.7%. VMEM -7.7%. IMPV -4.8%. MKTO -4.9%. SPRT -5.1%. CSOD -5.5%.
- Others: HIMX -4.6%. SIGM -5.6%. WATT -9.7%. CYNI -5.3%. ADNC -5.7%. PXLW -5%. SWIR -5.8%. MITK -6%. OCLR -6%.
Sep. 11, 2014, 7:11 AM
- "Combined, the two companies might be valued at $9.85-$14.80 with a midpoint of $12.33," says RBC Capital, upgrading JDS Uniphase (NASDAQ:JDSU) to Outperform, with price target lifted to $18 from $11.
- Previously: JDS Uniphase to split into two public companies
- JDSU +12.4% premarket to $13.61; other optical networking names, Ciena (NYSE:CIEN) +0.8%, Finisar (NASDAQ:FNSR) +1.5%.
Sep. 5, 2014, 9:39 AM
- Goldman is going contrarian on Ciena (NYSE:CIEN), upgrading shares to Buy after they tumbled yesterday due to the light guidance accompanying Ciena's FQ3 beat. The firm cites valuation, and a belief Ciena's margin weakness is temporary.
- On its CC (transcript), Ciena mentioned "up-front incentives" provided to AT&T to secure a supplier role for Ma Bell's massive Domain 2.0 SDN/NFV initiative will pressure FQ4 sales and margins.
- The company also stated early-stage international deployments will hurt margins, and that order timing/revenue recognition for a couple major international projects remains uncertain. Plenty of other companies (Finisar being the most recent) have also reported soft telecom capex is taking a toll.
- CEO Gary Smith insists Ciena's issues are temporary, and that efforts such as Domain 2.0 are a long-term positive. "We have been focused on the convergence between optical and packet, and also on driving a more software-driven architecture for some time now ... You are talking about a very large-scale shift at how people build networks. It's not trivial, not going to happen overnight." He adds 30% of Ciena's revenue now comes from "non-carrier infrastructure," much of it for Internet giants.
Sep. 4, 2014, 12:47 PM
Sep. 4, 2014, 7:31 AM| Sep. 4, 2014, 7:31 AM
Sep. 2, 2014, 1:45 PM
- Ahead of Thursday's FQ1 report, Jefferies' James Kisner has downgraded Finisar (FNSR -6.2%) to Hold, and cut his target by $6 to $19.
- Kisner cites weak pricing for both datacom and telecom optical components, weaker-than-expected 100G datacom share, a Chinese inventory correction, Cisco/Huawei vertical integration risk (previous), and looming price pressure/share loss to startups and possibly Intel.
- Fellow component vendors JDS Uniphase (JDSU -2.2%), Oclaro (OCLR -1.7%), and Alliance Fiber (AFOP -2.3%) are also off, as is equipment vendor Ciena (CIEN -2.1%). JDS and Alliance were among the names that followed Finisar lower last Wednesday, following cautious notes from MKM and RBC.
- Jefferies raised alarm bells about AT&T's wireline capex in June, before Juniper and JDS offered soft guidance blamed on light North American capex.
- A lot has been priced in: Finisar now only trades for 9x FY16E (ends April '16) EPS exc. net cash.
Aug. 27, 2014, 12:52 PM
- Ahead of Finisar's (FNSR -3.9%) Sep. 4 FQ1 report, MKM's Michael Genovese has respectively cut his revenue and EPS estimates for the quarter by $3M and $0.01, albeit while reiterating a Buy.
- Genovese predicts "soft 2HCY14 carrier capex and the mix shift to low margin Chinese sales is likely to result in fairly anemic Telecom revenue growth and limited [gross margin] expansion in the near term." But he's still upbeat about Finisar's datacom sales (boosted by Web data center buildouts), and thinks telecom sales "should improve in 2HCY15 as the 100G Metro market positively inflects."
- Likewise, RBC's Mark Sue is reiterating an Outperform, but offering cautious remarks. "Inventories are creeping upward, inventory lead-times are decreasing and there’s concern that current soft-pricing may continue or spread to higher speed products."
- Sue thinks Chinese competition is affecting pricing for "low-mid speed components," and suggests Finisar should slash capex and launch a buyback. Shares plunged in June due to light FQ1 EPS guidance that stemmed from margin pressure.
- A slew of other firms with strong telecom capex exposure are also trading lower. JDSU -1.8%. INFN -1.6%. CYNI -2.4%. AFOP -1.5%. CAVM -1.4%. ZHNE -1.6%. Juniper and multiple component vendors have already reported seeing soft near-term capex trends.
- For component vendors, a decent amount of bad news has been priced in since April.
Aug. 21, 2014, 3:59 PM
- Optical component vendors JDS Uniphase (JDSU +4.3%), Finisar (FNSR +3.4%), Oplink (OPLK +3.2%), Oclaro (OCLR +3.6%), and Alliance Fiber (AFOP +2.5%) have all rallied on a quiet day of trading, and so has client Ciena (CIEN +2.7%). No news has hit the wires to explain the gains.
- JDS, Oclaro, and Alliance Fiber all sold off in recent weeks (I, II, III) after providing disappointing guidance in their calendar Q2 reports. JDS (like Juniper following its Q2 report) observed soft North American wireline capex is pressuring industry sales.
Aug. 14, 2014, 11:46 AM
- Ciena (CIEN +1.9%) is catching a bid following vague M&A chatter. The gains come even though Cisco just reported an 11% Y/Y drop in service provider orders for the July quarter, and stated it expects carrier demand to remain soft for several quarters.
- Ciena fell yesterday in response to JDS Uniphase's weak guidance and cautious CC commentary. Its FQ3 report is due on Sep. 4.
Aug. 13, 2014, 2:45 PM
- B. Riley and Piper have downgraded JDS Uniphase (JDSU -8.9%) following its light Sep. quarter outlook. Each cites the impact of soft carrier spending.
- B. Riley's Dave Kang (downgrade to Neutral) notes the AT&T/DirecTV deal has affected Ma Bell's spending (previous), and that industry demand is pressured by a transition to software-defined networking (SDN) architectures that's still in its early stages.
- Kang: "In hindsight, we significantly under-estimated the potential impact of the SDN transition on the telecom equipment industry." He notes the transition is hurting JDS' test equipment/software sales (expected to fall to $160M-$175M in FQ1 from $199M in FQ4) more than its optical component sales. Optical component/laser division sales are expected to total $200M-$210M in FQ1 vs. $196.9M in FQ4.
- On the CC (transcript), CEO Tom Waechter admitted North American carriers "have ratcheted down wireline spending" (echoes of Juniper), and that wireless investments "have been tepid due to rapid changes in network technology architectures." On the other hand, he states component demand "remains healthy with notable strength in Datacom, 100G modulators and China's infrastructure spend."
- Ciena (CIEN -2.7%) and Fabrinet (FN -3%) have joined the ranks of companies following JDS lower. Cisco reports after the bell.
Aug. 11, 2014, 4:16 PM
- Cyan (NYSE:CYNI): Q2 EPS of -$0.25 beats by $0.05.
- Revenue of $24.4M (-23.0% Y/Y) beats by $2.52M.
- Shares +5.6%.
Jul. 29, 2014, 11:18 AM
- Cyan (CYNI +5.7%) is getting a lift from news major customer Windstream plans to spin off its network assets into a REIT. Windstream predicts the move will allow it to "accelerate broadband investments, transition faster to an IP network and pursue additional growth opportunities to better serve customers."
- Soft orders from Windstream have taken a toll on Cyan in recent quarters. Windstream fell to less than 10% of revenue in Q1, but CEO Mark Floyd expressed optimism on the CC (transcript) Windstream would increase orders for Cyan's metro network equipment in 2H14 once its long-haul network buildout was finished.
- Cyan's Q2 report arrives on Aug. 11.
Jul. 23, 2014, 1:45 PM
- Juniper's (JNPR -9.8%) soft Q3 guidance, along with its related commentary on U.S. telco demand, is taking a toll on fellow telecom equipment suppliers Cisco (CSCO -1.2%), Ciena (CIEN -3.2%), Cyan (CYNI -2.5%), Zhone (ZHNE -6.5%) Ruckus (RKUS -1.6%), and Sonus (SONS -3.8%).
- Optical component vendors JDS Uniphase (JDSU -2.9%) and Finisar (FNSR -2%) are also off, as are several chipmakers (previous) with heavy networking/telecom exposure.
- On its CC (transcript), Juniper stated "market dynamics including M&A activity" are affecting the "sequencing and timing" of U.S. carrier projects. Jefferies reported in June AT&T has significantly cut its wireline capex in the wake of the DirecTV deal.
- There has been speculation AT&T is keeping a lid on wireline capex ahead of the full rollout of its ambitious Domain 2.0 initiative, which will feature the launch of software-defined networking (SDN) and network functions virtualization (NFV) platforms.
- Juniper insists it remains well-positioned with the aforementioned U.S. carriers, and that it has "major design wins" for next-gen projects. The company adds demand remains healthy with U.S. federal, cable, and Internet clients.
- The company's router revenue rose 7% Y/Y in Q2 to $617.8M, and its switch revenue rose 25% to $199.8M. Security product revenue fell 8% to $111.6M. The Junos Pulse VPN software ops (about to be sold for $250M) contributed $31.4M in revenue ($15.9M product, $15.5M service).
Jun. 5, 2014, 12:49 PM
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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