Ciena Expects to Meet Forecasts
Optical networking company Ciena Corp. said Monday that it expects fourth-quarter earnings to be in line with Wall Street’s expectations despite the spending slowdown in the communications sector, sending its shares up nearly 10%.
The stock rose even though Ciena also said it will cut 10% of its work force and expects to take a charge of about $1.7 billion in the fourth quarter to write down the value of certain assets.
“You still have to hand it to [Ciena] for staying profitable in this environment and not imploding like we’ve seen competitors both large and small,” WR Hambrecht analyst Tim Savageaux said.
Industry leader Nortel Networks Corp. reported a third-quarter loss last month, and Sycamore Networks Inc. estimated a loss for its October quarter.
Ciena said, excluding charges, it expects earnings of 4 to 6 cents a share for the three months ended Oct. 31, compared with the 4 cents analysts on average were expecting. Estimates from 27 analysts range from 1 to 6 cents, according to Thomson Financial/First Call.
“It was a challenging year for all of us--customers, vendors, investors alike,” Ciena President and Chief Executive Gary Smith told analysts during a conference call Monday. “Ciena was among the last vendors to feel the impact.”
Shares of the Linthicum, Md., company closed up $1.65, or 9.6%, at $18.83 in Nasdaq trading after rising as high as $19.48.
The stock is down more than 75% from the beginning of the year, under-performing the American Stock Exchange Networking Index, which has fallen about 58%.
Other networking companies, such as Nortel, Cisco Systems Inc., Tellabs Inc., Redback Networks Inc. and Sonus Networks Inc., also have laid off workers amid the spending slowdown.
Ciena’s anticipated fourth-quarter earnings exclude a goodwill impairment charge, estimated restructuring costs, deferred stock compensation charges, payroll taxes on stock option exercises and amortization of intangibles and goodwill.
The company said it expects revenue of $367.8 million for the period, up 27% from a year earlier.
But Ciena did not provide a fiscal 2002 forecast.
Analysts on average have cut their earnings estimates to 41 cents a share from 99 cents in August, according to First Call. At that time, Ciena lowered its 2001 forecast to 59 cents to 64 cents a share from a previous range of 72 cents to 75 cents, and it said it expected similar results for 2002.
Ciena’s Smith said then that 2001 revenue would increase 85% to 90% from the previous year, and 2002 revenue would grow in the “early teens,” down from a previous growth forecast of 45% to 65%.
Ciena also said it will cut 380 positions, about 10% of its total work force. The company will take a $5-million to $6-million charge for the cuts, which will be mainly in manufacturing operations, in the first quarter of fiscal 2002.
