CIEN CC
PR Stuff
CIENA Corporation (NASDAQ:CIEN) today reported revenue of $352.0 million for its first fiscal quarter ended January 31, 2001.
CIENA's first quarter sales represent sequential revenue growth of more than 22 percent over the Company's fiscal fourth quarter revenue of $287.6 million, and an increase of more than 130 percent as compared to the same period a year ago when the Company reported revenue of $152.2 million.
Adjusted net income for the first quarter, exclusive of payroll tax on stock option exercises, was $54.1 million, or $0.18, earnings per diluted share.
This represents an increase of approximately 31 percent compared with adjusted net income for the previous quarter, exclusive of payroll tax on stock option exercises and provision for doubtful accounts, of $41.3 million, or $0.14, earnings per diluted share.
For the same period in the previous year, the Company reported adjusted net income of $9.1 million, or $0.03, earnings per diluted share.1 Consensus of First Call estimates for CIENA's first quarter fiscal 2001 was $0.15 earnings per diluted share.
"CIENA continues to see robust growth opportunities across its family of next-generation intelligent optical networking products," said CIENA Chairman and CEO, Patrick Nettles. "We believe CIENA's strong growth and good order visibility in an otherwise uncertain carrier spending environment results from our exclusive focus on next-generation optical networking equipment and our position as a strategic supplier to leading service providers."
"There is no question that economic factors are causing service providers to more carefully scrutinize where they spend their budget dollars," said Gary Smith, CIENA's president and chief operating officer. "It is just this sort of dynamic that we believe is benefiting CIENA by accelerating the shift from cumbersome, legacy network architectures to less costly, more efficient, intelligent next-generation optical network architectures."
CIENA continues to diversify its customer base, adding three new customers in the first quarter, one of which, MetroRed, has been named publicly. In addition, CIENA also made initial optical networking equipment shipments to Level 3, a significant new MultiWave CoreDirector(TM) customer, during its fiscal first quarter.
The Company's total revenue-generating optical networking equipment customer base now totals 43, of which, 30 contributed to CIENA's revenues during the most recent quarter.
The first quarter marked the third sequential quarter in which CIENA recognized revenues from sales of CoreDirector, its next-generation, intelligent optical core switch and the first quarter where CoreDirector sales surpassed ten percent of total revenue.
The Company believes that it has lengthened its industry lead in this critical product area, meeting its stated goal of achieving ten commercial customers for CoreDirector by the end of the fiscal first quarter.
"We believe CIENA is positioned to successfully navigate and grow our business through the recent concerns about carrier spending," said CIENA's Smith. "Our exclusive focus on next-generation equipment means that we stand to be a primary beneficiary as carriers shift spending away from legacy equipment to intelligent optical networks that will enable them to lower capital and operating costs while delivering new, revenue-generating high-bandwidth services. Among next-generation equipment providers, only CIENA has both the breadth of products and the critical mass required to install and support these new optical networks on a global basis."
Business Outlook
Commenting on CIENA's business outlook Nettles said: "We expect our business will continue to grow faster than the overall market, provided we execute successfully. As a result, we are raising our revenue guidance from the 75 to 85 percent growth over fiscal year 2000 we offered last quarter. Based on current visibility, and factoring in the expected completion of our announced acquisition of Cyras Systems, Inc. by the end of the first calendar quarter of 2001, we now believe we will be able to achieve 2001 revenue growth of between 95 to 105 percent over last year, which translates into a revenue range of between $1.67 to $1.76 billion for fiscal year 2001."
Chairman and CEO Patrick H. Nettles
President and COO Gary B. Smith
SVP, Finance and CFO Joseph R. Chinnici
CC Notes
- 352M in rev, q2q 22% growth, 130% y2y growth
- 30 customers in optical networking
- 3 new customers
- 3 new 10% customers or 62% of rev
- recent Europe wins not announced
- rev from international will be lumpy depending on customer build programs
- growth is long distance transport sales
- DWDM seeing strong growth
- Coredirector optical switch over 10% of revs
- Metroproducts seeing growth but less than 10% of revs
- Multi-wave Corestream revs doubles q2q
- Corestream OC-192 channel cards seeing strong sales and beat OC-48 Corestream
- OC-48 is still dominant and higher rev than OC-192 right now
- Mid 2001 OC-192 will be dominant channel rate
- Netincome (excl options and taxes) 51.4M or 0.18 EPS vs. 014
- GM was 45.4%
- Oper expenses 83M up from 71M in q4
- Cash 259.7M or up 22% - not include cash raise in recent offert
- DSO 64 and down from 78 last q4, Target is 70-90 days
- Inventory 207.2M vs. 141.3M last q, finished goods awaiting customer acceptance, Raw material increase to meet early q2 orders, Will increase as new products rolled out
- Turns 3.7 vs 4.5 last q
- Personnel 3193 up 418 from last q
Gary
- delighted with results of the quarter
- better than 20% q2q growth
- four quarters of sequential growth
- our focus of only next gen products, and shift to next gen in telco spending, and tier 1 alliances does position us for success
- Long haul transport products continue to be largest contributor to rev. System sales outpace channel card sales which is good news for the future. See OC-192 products doing well with five customer taking shipment in q1. Shipped Ultralong haul feature set for corestream shipped to 2 customer in q1.
- Expect to ramp OC-192 in q2. We are seeing OC-192 taking significant market share from closed systems. Will continue to see strong growth and taking of significant market share in long haul transport space as the shift continue.
- Open architecture long haul DWDM is beating Legacy systems because carriers are looking for alternatives to single vendor closed architechture type solutions that don’t bear the economic solution or operational benefit that they want. As Coredirector will proliferate and replace Legacy ADM.
- McLeod win shows this happening.
- Many Tier 1 carriers start or midst of long haul builds in the next few months in NA alone.
- Metro continues to offer good opportunity. Two new metro customer. Shipped to several existing customers.
- OC-192 availability has been key competitive differentiator. Gigabit Ethernet are emerging as significant drivers for metro applications. Metro ring space is shaping up to be a three horse race.
- Our existing metro presence will ensure we get our share of the business.
- The addition of our K2 products opens up 8B market
- LVLT is new coredirector customer.
- Coredirector revs will ramp and be 10% of FY rev for 2001. May float in and out of 10% range.
- Coredictor customers are LVLT, Genuity, Broadwing, and Mcleod.
- We are trying Coredirector in Europe.
- We will be scaling to meet customer demand
Pat
- thanks employees and suppliers
- Cyrus acquisition is progressing as planned. Close it in first calendar quarter
- Reaction is positive.
- Visibility – very strong demand across product lines and demand across all lines. Good into next few quarters.
- We are seeing significant shift in spending from legacy equipment to next gen equipment. Tight economic conditions are hastening this shift. Carriers want efficiencies and cost reduction. CIEN exclusive focus on next gen intelligent optical network makes us prime beneficary of this shift in spending.
- Two optical markets
- 1) Legacy - SONET ATM – sees this as flat over next four years
- 2) Long distance DWDM, Metro DWDM, Next gen SONET, Next gen switches. Growth 70% compounded annually for next four years
- Carriers must change business model to grow revs and profit faster than capex spending and opex. Over the last few years, capex and opex have outpace rev and profit growth. Use to be few opportunities to change model in legacy system. Leading carriers will be building more efficent optical network to gain competitive advantage.
- CIEN is only end to end next gen company and will outdistance competitors.
Joe
- Will close Cyrus this quarter. March is expected date
- Revising rev upward for FY and sequential growth
- 14-16% q2q rev growth, 95-105% growth for 2001 vs. 2000
- Based this on minimum sales of Cyrus K2 product.
- Will see lower GM in future as Cryus ramps. Up from q1 to q2.
- R&D will be 13-15% and trend down to target model of 12%
- SG&A will be 10% in q2
- G&A 3-4% for q2
- Taxrate suppose to be 33.5%
- Add 11M shares from recent offering and 25M from Cyrus
- Other income will be 9-11M from getting higher interest from recent offering
- Will see 1-2M shares added per quarter
- FY2001 EPS is 0.73-0.75 pro forma
- 45-65% EPS growth in 2002 vs. 2001
- GM should migrate upward slightly.
- Opex will trend to 12-14%
- SGA 10-12% target
Q&A
JPM – thanks for good news – Pricing environment?
A: Long haul – nothing unusual – have market lead, not seeing pricing issues, just usual rough and tumble.
Metro - same
Switching – coredirector is first to market and have considerable competitive advantage so not see any aggressive pricing near term
Average size of long haul building up?
A: XOXO and Mcleod are substantial and seeing a number of tier 1 carriers going toward aggressive buildouts
Robbie stephens – Metro color?
A: Metro sales were slightly down from q4. Will be back up next q.
Optical switch competitions to corediretor?
A: Some telium, but not Tier 1 (big carriers with money)
Manufacturer capacity?
A: Conitunal ramping up of capacity
JBSWarburg – 10 coredirector customers?
A: Over the lab phase. We have commitments and have shipped. More wholesale shipping in q2. Not split up contribution to rev. Still in first phase for this.
10% customers?
A: Will see meaning spending for remainers for the year. Have three.
SSB: Capex shift? Long haul? Selling more systems than line cards?
A: Segmentation occuring in carriers. There are those with cash and those financially challenged. Cash sees buildout opportunity with lower cost and more intelligence. They are viewing this as an opprotunity to gain market share and create barrier to entry from carriers. There is no slacking of demand for bandwidth. All of the carriers are looking to spend $$$ wisely and that plays well with us. Coredirector unlocks value in the big fat pipes. Laying fiber ecomonics allows 1 terabyte of data with OC-192. System vs. Line cards. Split was 50%, gone down for cards and more systems.
12.5 channels systems?
A: Not announced timing of it.
Lehman – LVLT color?
A: We are seeing coredirector as straight replacement of cross connect or being able replace crossconnects and ATM at the same same creating mesh type architecture. They don’t throw out old equipment and light another piece of fiber with new equipment. This limits the spending on legacy equipment.
EPS for 2001 includes dilutive effect of cyrus?
A: 0.73-0.75 includes Cyrus
Dain RW – Coredirector deployment – high demand for more port counts?
A; if they replace the switching piece directly, the the crossconnects get a higher Port count. If they replace the ADM also, can start out with lower port counts. Seeing both happening, no trend. Four trial with K2.
SGCowens – congrats – Cyrus bundling with which CIEN product? Regional demand?
A; K2 is positive with Coredirector. Primary motivation for entry into this space. Plays into metro space well. Complementary with Coredirector CI. CI will be linked with K2. Seeing strong builds in NA. Large builds in Europe not announced yet. CLEC in europe is similar to NA. Not seeing disparity between europe and asia. Europe long haul looks good.
Nutmeg sec – SAB101?
A: Not seeing much effect since compliant before took effect.
EPS adjusted for 2000 due to SBA?
A: not gone and done that. Not material.
TomWeisel – congrats – inventory breakdown?
A: Not give it in the CC. Released in 10Q. finished goods increasing due to function of all product growing not just coredirector. 77.5M in raw materail, 87M in finished goods, reserves 18.5M
Long Haul OC-48 competition?
A: Seeing NT on transport only. NT is only deploying their closed system.
Metro % of rev?
A: around 10% for coredirector. Metro is a fairly low ASP. Metro ring space is only 1B market.
BAO – Coredirector set in manufacturer inhouse?
A: Got the mfr setup and flowing nicely now. Annuity rev stream is channel card and new features updated will get revs.
First Union – Inventory turns target?
A: Stay in the mid threes. Must work through these long builds in NA. Like to get to mid 4s, but a year away.
ABMAmbo – congrats – SDH the main issue in europe? Vendor financing?
A: SDH is a gating item for coredirector sales in europe. Not started running out networks in europe yet so not recognize revs yet. Vendor financing not a fundamental issue. We have done some small vendor financing plans that we are laying off to third parties. The quality of our AR is very good shape. We can rollout networks faster than our competitors since we own the food chain.
Joecycle – visibilty?
A: Visibility in Europe is one to two quarter outs. We got good strategic relationships with our large customers because our breath of product range and volume. Overall visibility is one to two quarters.
Open system and interoperability?
A: We always used open architecture. We think customers need the best of breed and not locked into a closed system. We are active in GMPLS standards development.
DBAB – Long haul market? Components availability? Service rev?
A: Long haul is defined by us as next gen, open architecture, high density type of systems not 32 channel open system or legacy. In the space that we are in (long haul), we are clearly taking share due migration from legacy. Components are manageable. We have used inventory as a strategic tool for components. Channel filters have been in short supply last year. Service revs was below 5% again. Becomes a small part as business ramps.
ING Baring – mfr plants? Outsourced?
A: Outsource is for electronics mainly. Optical is done in house because we have competitive advantage and not really outsourceable. We will outsource if it could have done, but see it done in house for the next year.
Mfr is scaling for the transport build.
WRHambrect – great numbers – K2 pressure margins?
A: Coredirector margin is similar to other switches. Not discuss margin since we negoiate with customers on price. Coredirector contribution will improve margins and will enable transport revenues.
Breen Murray – pricing pressure in transport?
A: Combination of transport equipment with coredirector offers a compelling alternative and sig savings for carrier capex. Hard to see pricing pressure swinging the issue for legacy providers. Market is competitive, but we are gaining an advantage due to our combination of products.
Cyrus OC-192?
A: We looked at Cyrus as a desirable target due to similar architecture approach. Cyrus is OC-192 ready and has been delivered for trials. Allows adding port service on flexible basis for data services. Customer don’t want to see IP routers delivered on this OC-192 platform. K2 is being integrated into the product line.
Resi Waburt – Europe sales from GTS? Vendor financing? When see other 6 coredirector customers announced?
A: GTS was planning a large OC-192 in Europe. Build is complete now. Will see little rev only get channel adds now. Interroute and associated vendor financing not big part of model. Six customers will announce it. All will contribute during the year.
Carlsweetman – good quarter – doubtful accounts? CI timing?
A: Not give out doubtful accts, but not change much. Coredirector CI and OC-192 products will ship in March or April.
ASIA space?
A: Focusing on Japan and Korea. Are seeing prospect from global companies wanting to build a network in Asia. China is large but can’t see how to make money on it.
Really good CC to listen on the market place. Maybe I detected a weakness in the metro area, but CIEN gaining share in long haul.
Jack |
