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Technology Stocks : Ciena (CIEN) -- Ignore unavailable to you. Want to Upgrade?

To: nghi vu who wrote (1676)	3/4/1998 4:02:00 PM
From: djane	Respond to of 12623

[3/3/98 Upside.com article "Ciena speaks"] upside.com Ciena Speaks March 03, 1998 By Chuck Lenatti Patrick Nettles, president and CEO of Ciena Corp., visited UPSIDE's office in San Mateo, Calif., last week, and discussed some recent news that has affected his company. On Feb. 20, Ciena reported that its earnings and sales had nearly tripled over last year. Still, the company's stock dropped 29 percent, to $41.13 per share. Why? Ciena said that projected revenues for its second quarter would be down because one of its key customers, Worldcom Inc., was reducing the amount of equipment it would buy from Ciena. Nettles also commented on an end-of-January report that AT&T Corp. spin-off Lucent Technologies Inc. had developed a fiber-optic technology that would deliver five times the bandwidth of existing systems. UPSIDE: How will the reduction in WorldCom's orders affect Ciena in the second quarter and the coming year? NETTLES: This is the personification of the risk of having a small customer base. Worldcom had a policy to buy against a two-year forecast for their bandwidth needs. Starting this year their program is much larger. They're building in Europe, they've got MCI to digest. There's a lot going on. To re-deploy their capital in the best manner, they are shifting to a just-in-time approach to bandwidth deployment. From that point of view, they've taken a hiatus from the same level of deployment in the long-distance network. What that means is hard to interpret, but the best indication is that for the next quarter or two they won't be deploying as they have in the past. They have indicated that there are opportunities in their European build-out. The most important thing is that we've been given strong assurances that we're the supplier of choice, that this is not a competitive issue. It's a capital deployment issue from their point of view. It's one of the little bumps in the road that does not affect our plans substantially at all. It obviously affects the Wall Street people, who trade on quarterly progress. But I don't think that's a deep factor to be concerned about. You think it's a short-term sales hit, but long term everything will work out? That's our view. The good news is that the interest in our 40-channel system is higher than expected. And the overall interest in the market in the second- and third-tier players, the competitive local exchange carriers and the second-tier interexchange carriers is up. So there's an opportunity for us to replace a lot of the revenue--hopefully, all of it--as we go through the next two quarters. Lucent's announced a system it says can transmit as many as 400 billion bits of data per second over a single strand of fiber--five times the bandwidth of current systems. How does that compete with Ciena's system? I guess if I didn't have any customers and wasn't shipping product to them, I'd make announcements too. I'd ask where are the optical cross connects they announced last year. Whether it's a 40- or an 80-channel system isn't the issue. The issue is whether it's a product that can be deployed. It makes sense from their point of view to put out something a little ahead of schedule so they try to freeze the market. Most of the customers that we're talking with don't seem to think that's a viable alternative, and it hasn't had much affect on our business that I can see. Our approach is real products to real customers. We'll stick to that and make announcements in the context of things we're shipping, not things we're talking about two years or three years out. Chuck Lenatti is staff editor at UPSIDE.