February 20, 1998
Ciena Posts Tripled Earnings,
But Stock Plunges on Forecast
By GREGORY ZUCKERMAN
Staff Reporter of THE WALL STREET JOURNAL
Ciena Corp., a telecommunications-equipment supplier, reported that fiscal
first-quarter earnings tripled, but warned that second-quarter profit will likely
be lower than expected as a result of reduced orders from WorldCom Inc.
The announcement, made after the markets closed Thursday, sent Ciena's
shares tumbling in after-hours trading. Before the announcement, Ciena shares
rose $3.125 to $58.125 on the Nasdaq Stock Market, but in after-hours trading,
the stock plunged to $46.
The Linthicum, Md., supplier of high-speed systems for long-distance and
local-exchange carriers said that a shift by WorldCom to just-in-time
bandwidth-deployment ordering will result in "a substantial reduction in system
requirements from Ciena during fiscal year 1998." Ciena wouldn't quantify
how the reduced WorldCom orders will affect future earnings.
But company executives acknowledged that the WorldCom decision, relayed to
Ciena earlier this week, puts the company's earnings outlook in doubt.
"We're comfortable with consensus revenue expectations of $603 million for
fiscal year 1998, but the $1.47 a share [First Call consensus of analysts
estimates] is uncertain given the new news from WorldCom," said Suzanne
DuLong, Ciena's director of investor relations.
John Sidgmore, WorldCom's chief operating officer, said, "During 1997, Ciena
delivered more capacity and at a faster rate than we frankly thought was
possible. As a result, our long-distance capacity deployment is ahead of
schedule."
Ciena said it plans to make up for the expected lost revenue caused by the
WorldCom shift by increasing revenues from existing and potential customers.
The company also said that "significant purchasing" from WorldCom could
resume in the latter part of the year.
For the quarter ended Jan. 31, Ciena net income jumped to $39.8 million from
$13.1 million a year earlier. Diluted per-share earnings, or net divided by
common shares outstanding plus potential common shares from securities such
as options, increased to 37 cents from 13 cents. Ciena's basic per-share
earnings, or net divided by shares outstanding, fell to 40 cents from 99 cents.
The results for the first quarter were ahead of a First Call consensus of
analysts' estimates. Ciena's revenue for the quarter more than doubled to
$134.3 million from $53.9 million.
Ciena shares have shown strength in recent weeks, despite a new-product
introduction from competitor Lucent Technologies Inc. that some say could
hurt Ciena. Separately, AT&T Corp. is considering purchasing Ciena's
telecommunications system, although the size and timing of any purchases from
Ciena remain unpredictable, Ciena said Thursday. AT&T is not a current
customer of Ciena.
Ciena recently announced the acquisition of closely held ATI Telecom
International of Norcross, Ga., for $52.5 million in stock. The company said
the deal is expected to add moderately to 1998 earnings.
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