djane--
Here's my take of the CIEN conference call, notwithstanding thestreet.com's pessimistic read on it.
The bad news:
The revenues were flat (129 million for the quarter compared to 121 last year; and gross margin will fall below the estimated 52-55%) for a couple of reasons: One customer (WCOM, I assume) pushed a 25 million dollar order to next quarter. They do not expect to realize that revenue until the last quarter of this year when they report on a combined basis with TLAB. Another customer (Sprint, I assume) extracted a big volume discount from CIEN, which is going to hurt margin this quarter. AT&T has basically chosen LU to supply the 16 channel system, by ending testing with CIEN on it.
The Good news:
The revenue lost this quarter will be recaptured by the end of the year. TLAB does not expect the disappointing CIEN results of this quarter to affect its previous prediction of 2-4 cents dilution on the combined companies earnings in each of the next two quarters. Operating margin will return to the 52-55% margin CIEN predicted by next quarter. WCOM has started ordering again, and they expect WCOM-MCI orders to be strong in '99. They expect AT&T to look at the 40 channel system system, and they might even get some revenue from that as early as the end of this calendar year. They are still the ONLY DWDM supplier that can deliver a system that has greater than 16 channels. Revenue is diversifying. CIEN doubled the number of customers to 11, and with TLAB's sales force, they expect alot more customers coming through the door.
I think the story here is the reporting is going to be a little bumpy or lumpy with CIEN, but there has been no fundamental change. It's not like this is even going to affect earnings by early next year. So what's the deal with a 50% decline in CIEN/TLAB since a month ago?!? The *#%&(# if I know.
DougHboy. |
