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Ciena Beats Revenue Estimates as Shares Drop 19%

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Ciena Corporation (NASDAQ:CIEN), a telecommunications network specialist, managed to beat the $473 million average revenue estimate by Zacks Investment Research, after reporting a total revenue of $474.1 million for the third quarter of 2012.

Ciena Beats Revenue Estimates as Shares Drop 19%

The company posted a net loss of $4.1 million or $0.04 per share. Its net income was $8.3 million or $0.08 per share.

The company’s total revenue for the third quarter this year was 8.9 percent higher year-over-year, due to higher demand. According to the company, its product revenue increased by 6.7 percent to $373.4 million and its services revenue was up by 18.1 percent to $100.7 million year-over-year.  Ciena Corporation (NASDAQ:CIEN)’s product revenues represent 78.8 percent, while the services revenues account for 21.2 percent of the company’s total revenue year-over-year.

In a statement, Gary Smith, chief executive officer of Ciena said, “We continue to win in the market and take share as demonstrated by a solid operating performance in the third quarter. We are experiencing the effects of ongoing macroeconomic challenges and slower than expected roll-outs of new design wins. However, our approach to the market is working, our OPn architecture vision is gaining traction with customers globally, and our view of the long-term opportunity is unchanged.”

Based on the Ciena’s financial statement, its adjusted gross margin remained at 39.6 percent, while its adjusted operating expenses was 1.6 percent from $172.9 million during second quarter to $175.6 million, during the third quarter of current fiscal year.

According to the company, its business segments, including the Packet-Optical Transport generated $298.5 million, Packet-Optical Switching $37.8 million, Carrier-Ethernet Solutions $31.3 million, and Software and Services $106.5 million.

Smith told analysts during the company’s earnings conference call, Ciena Corporation (NASDAQ:CIEN)’s weakest market is Europe while North America remained its strongest market. Fifty percent (50%) of its total revenue came from customers outside the United States.

During the third quarter, Ciena Corporation (NASDAQ:CIEN)’s total cash and investments was $667.3 million, accounts receivable balance was $379.1 million, and its inventories were worth $245 million.

Ciena Corporation (NASDAQ:CIEN) expects its fourth quarter revenue is between the range of $455 to $480 million, while its gross margin increase is projected at 40 percent. The outlook of the company for the upcoming quarter is $25.4 million lower than the $492.9 million expectations of analysts from Morgan Stanley (NYSE:MS). According to analysts, its fourth op margin “remains dangerously close to zero in the 0-2 percent range,” below their 3.3 percent estimate.

Shares are currently trading down 18.7% at the time of this writing.

Nomura Equity Research notes another reason why the stock may have tanked. They state in a report released today;  Management has so far given no specific reason for the disappointing revenue guidance, stating simply that “we are experience the effects of ongoing macroeconomic challenges and slower than expected rollouts of new design wins”

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Marie Cabural

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