Ciena delivers upside surprise

Summary:It's been a great quarter for Ciena considering the state of the technology market, and it plans to do even better than originally expected next year

Fibre optic gear maker Ciena topped earnings estimates in its fourth quarter with earnings of $41.3m, or 14 cents a share, excluding one-time items, on sales of $287.6m. The company also upped its targets for 2001.

Earnings tracking firm First Call projected a profit of 12 cents a share. Analysts expected sales to be in the $277m range for the quarter ending 31 October.

Revenue growth for the quarter was up 23 percent sequentially, indicating the company has been gaining on rivals such as Nortel. In research notes, many analysts said that Ciena appeared to be gaining shares.

The company said its fourth quarter earnings exclude provisions for doubtful accounts and payroll taxes on stock options. Ciena's provisions for doubtful accounts -- customers that can't pay up -- rose to $19.2m in the fourth quarter. A year ago, Ciena set aside $250,000.

The provisions for doubtful accounts cut earnings to 7 cents a share. Including provisions for doubtful accounts and payroll taxes, Ciena earned 6 cents a share.

Analysts had been expecting the provisions. On 5 September, the company said it would take a charge because of the financial troubles of customer Iaxis.

Overall, Ciena had a strong quarter. The company cited robust growth for its optical switching and metropolitan optical networking products and long-haul transport systems. Ciena also diversified its customer base, adding four customers in the quarter. Ciena has 42 optical networking equipment customers with 27 of those customers contributing to revenue this quarter.

Since Ciena has landed a contract with Qwest, the company has been gaining momentum with big carriers, analysts said. "With growing acceptance of the company's product lines, we believe Ciena is one of the best-positioned companies on the photonics sector," said Wit SoundView analysts Kevin Slocum, in a note ahead of Ciena's earnings.

Ciena was also upbeat on its outlook. Ciena said it should be able to grow faster than the market. On a conference call with analysts, chief executive Patrick Nettles guided 2001 revenue projections higher. The company expects revenue growth of 75 percent to 85 percent for 2001.

For the first quarter, Nettles said current First Call earnings estimates of 14 cents a share should be a penny higher. For 2001, Nettles said analysts should raise earnings estimates of 63 cents a share by about 4 cents to 7 cents a share.

For 2000, Ciena reported earnings excluding one-time items of $98.4 million, or 33 cents a share, on sales of $858.8m. Sales were up 78 percent from 1999.

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Topics: Tech Industry

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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