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Technology Stocks : SDL, Inc. [Nasdaq: SDLI] -- Ignore unavailable to you. Want to Upgrade?

To: Joe Giorgianni who wrote (3618)	12/7/2000 11:11:10 PM
From: pat mudge	Respond to of 3951

I'm sure everyone's seen Ciena's results, but here's the WSJ response, validating what we've been saying all along: interactive.wsj.com@6.cgi?mfmuse/text/autowire/data/BT-CO-20001207-004460.djml/&d2hconverter=display-d2h&NVP=&template=atlas-srch-searchrecent-nf.tmpl&form=atlas-srch-searchrecent-nf.html&from-and=AND&to-and=AND&sort=Article-Doc-Date+desc&qand=&bool_query=fiber+optics&dbname=%26name1%3Ddbname%26name2%3Ddbname%26name3%3Ddbname%26period%3D%3A720&location=article&HI= <<< December 7, 2000 -------------------------------------------------------------------------------- Ciena Strikes Another Blow For Fiber Optic Equipment Cos By JOHNATHAN BURNS Of DOW JONES NEWSWIRES NEW YORK -- Ciena Corp. (CIEN) fired a load of buckshot across the nose of the bear Thursday, beating Wall Street's fiscal fourth-quarter expectations and raising earnings projections for fiscal year 2001 by 4 cents to 7 cents a share. The fiber optic systems maker posted earnings per share of 14 cents, compared with the analyst consensus of 12 cents, on net income of $41.3 million in the fourth quarter. Ciena also recorded revenue of $287.6 million - about $8 million above expectations and twice the $141.4 million the company reported in the year-ago period. More importantly, the company's top executives sought to soothe nervous investors by raising expectations and saying they see no signs of a slowdown in spending for fiber optic systems. "There is no slowdown," Chief Operating Officer Gary Smith told Dow Jones Newswires. "We listen very carefully to our customers and we are very sensitive to their issues. What we are seeing is a market shift away from legacy (telecommunications equipment) to intelligent, optical (equipment). We believe we're ahead of the competition on that." Indeed, Ciena's intelligent optical switching product CoreDirector is widely regarded as the leading commercially available technology in its space. Smith said Ciena expects to ship as much as $50 million worth of CoreDirector product by the end of the calendar year, though all of that will not be recognized as revenue. Smith said CoreDirector may account for as much as 10% of Ciena's revenue by the end of the ongoing first fiscal quarter. "CoreDirector is going to be the major revenue driver for Ciena," said Jim Jungjohann, telecommunications equipment analyst with CIBC World Markets Corp. Coinciding with its earnings release, Ciena announced that Broadwing Communications, owned by Broadwing Inc. (BRW), will deploy CoreDirector across its nationwide network. The announcement came with a glowing endorsement by Broadwing Communications' Chief Operating Officer Rick Pontin. "CoreDirector presents Broadwing with multiple ways to lower costs, drive new revenue, create a smarter network and set ourselves apart with customized service offerings," Pontin said. While Pontin's comments might be taken with a dose of skepticism by some, Jungjohann said the strength of CoreDirector's technology will be hard to ignore by service providers. AT&T Corp. (T), the nation's largest long-distance service provider, is rumored to now be testing CoreDirector. AT&T wouldn't comment on the rumors, citing corporate policy. "CoreDirector is such a strong product, there's no way AT&T could ignore its success," Jungjohann said. In the fourth quarter, Ciena took a loss of $19.2 million as a provision on doubtful accounts relating to bankrupt European telecommunications carrier Iaxis Ltd. That charge, coupled with $3.78 million of taxes on stock options, would reduce Ciena's earnings by 4 cents a share. Ciena's forecast for the fiber optic market might seem to contrast with recent projections made by larger communications equipment providers. However, Ciena is more of a pure fiber optics play than peers Nortel Networks Corp. (NT) and Lucent Technologies Inc. (LU). Both of those companies sell a lot of legacy switching equipment for voice networks. "We see ourselves splitting out from the legacy (equipment) providers like Nortel and Lucent," Smith said. "We are seeing a shift in the competitive landscape." Ciena reported 42 customers in the most recent quarter, and said sales should increase 75% to 85% in fiscal 2001. As a result, the company bumped up fiscal first quarter guidance by a penny a share to 15 cents and said fiscal year 2001 earnings will be anywhere from 4 cents to 7 cents a share higher than previous expectations of 63 cents. In a morning conference call, Ciena executives said they would seek further customer diversification. Company officials also said operating expenses will likely creep up along with sales. Ciena's forecasts only reemphasize what analysts like Jungjohann and other industry observers and participants have been saying for months: even if overall telecommunications spending growth rates are tapering off, spending for fiber optic systems will increase. "Carriers don't have a choice," Jungjohann said, noting that fiber optics help reduce the costs of providing services. Jungjohann does have some concern that consolidation among the long-distance service providers will create some disruptions for equipment makers. "We see a lot of shakeout in that sector," he said. "We see 20 long-distance carriers consolidating into about five in the next few years." As a result, Jungjohann said investors shouldn't "overweigh" their holdings with systems makers and should consider moving "further down the food chain" to component makers. >>>>>>