SSB is neutral on CIEN, difficult to believe 10% layoff unless they believed demand would remain weak
Excerpts follow.
CIENA (CIEN)
CIEN: Ciena Preannounces Above-Consensus 3H (Neutral, High Risk)
Fiscal 4Q Results Mkt Cap: $5,805.1 mil.
November 12, 2001 SUMMARY
* Ciena preannounced stronger-than-expected fiscal
TELECOMMUNICATIONS 4Q results. Revenues are expected to come in at
EQUIPMENT $368 million, 4% above our forecast and exceeding
B. Alexander Henderson consensus expectations by 3%.
* Earnings are expected to come in at $0.04-$0.06
per share, compared to consensus expectations of
Timothy Anderson $0.04 per share.
* Mgmt reaffirmed that they logged revs. from the
Cyras product in fiscal 4Q.
Daryl Armstrong * The company is trimming 10% of its workforce or
around 380 people immediately. The cut is expected
to lower fiscal 2002 COGS by $21-$23 million on an
annualized basis.
* While encouraged with the preannouncement, we
question whether Ciena's momentum is sustainable.
The company's decision to cut headcount suggests
that demand continues to be weak. In addition,
Qwest, an important Ciena customers, is expected to
show a sharp Q-Q reduction to calendar 4Q capex.
we still harbor concern relative to the forward outlook. First, the company's
decision to cut manufacturing headcount at this point suggests that demand is
not rebounding. It seems difficult to believe that the company would shed
over 10% of their workforce unless they believed demand would remain weak for
at least a few quarters. Secondly, the carrier capex environment remains
extremely challenging. Qwest, a significant Ciena customer, is expected to
show a steep sequential declines in capex in the calendar 4Q period, falling
to around $700 million from $2.2 billion. Consequently, we need further
confirmation before becoming constructive on the outlook. |
