To: Steve Warkentin who wrote (8938 ) 5/20/2000 2:34:00 PM From: Cyrus Mashhoodi Read Replies (2) | Respond to
Ciena (CIEN) 120 11/16 -16 5/8: It's rough when you blow away earnings estimates, issue positive guidance for the future and the market rewards you with...a 12% drop. Such is the nature of the volatile optical equipment sector. All the fiber optic companies are trading way off today, despite very solid reports from Ciena and Sycamore (SCMR) after the close yesterday. Nevermind the market reaction, because Ciena's Q2 report was excellent. Earnings came in at $18.4 mln, or $0.12 per share, topping the Street consensus by two cents on revenues of $185.7 mln, representing a 22% sequential and 66% annual increase. The Street consensus revenue estimate was $170 mln, and Ciena surpassed expectations on the back of strong DWDM orders from Qwest (Q) and a yet to be announced new customer (rumored to be GTS), that are keeping demand high for Ciena's optical components. The most exciting part of the release for Ciena investors was the announcement that trials of their new MultiWave CoreDirector switch have gone well and they will begin shipping the product in volume this quarter. CEO Patrick Nettles indicated that he expects CoreDirector sales to drive higher-than-expected revenue and earnings growth in the next two quarters. Along with CoreDirector, Ciena's MultiWave CoreStream long-distance optical transport product which is capable of 10-gigabytes per second, will help drive "strong sequential revenue growth" in Q3 and Q4. Prospects are very solid going forward for Ciena and as long as the company continues to execute well in the face of vigorous demand. Given that the trials of the CoreDirector are progressing well, other than standard industry pricing pressures, the only foreseeable execution risk is component supply shortages. Electrical components are said to be subject to minor constraints according to ABN AMRO, which is the only firm of 20 to not have a BUY or STRONG BUY rating on the stock, they currently have a HOLD on CIEN shares. You may recall that Tellabs (TLAB) warned of electrical component shortages in April, but Ciena, while admitting inventories were tight, said it does not see component shortages costing them any customers in the foreseeable future. Read that as you will. That caveat didn't scare any of the other analysts, as the rest of Wall Street is singing the praises of Ciena's second quarter. - Matt Gould, Briefing.com
