Tuesday, December 7, 2010

Ciena Corp. (NASDAQ: CIEN): Q4 Earnings Preview 2010

Ciena Corp. (NASDAQ: CIEN) is scheduled to release its fiscal fourth-quarter financial results before the market open on Thursday, December 9, 2010. Analysts, on average, expect the company to post a loss of 15 cents per share on revenue of $405.31 million. In the year ago quarter, the company posted a loss of 12 cents per share on revenue of $176.27 million.

Ciena Corporation provides communications networking equipment, software, and services that support the transport, switching, aggregation, and management of voice, video, and data traffic.

In the preceding fiscal third quarter, the Linthicum, Maryland-based company's net income was $109.9 million, or $1.18 a share, compared to a loss of $26.5 million, or 29 cents a share, in the year-earlier quarter. On an adjusted basis, the net loss was 9 cents a share in the second quarter. Revenue plunged to $164.8 million from $389.7 million. Analysts, on average, expected the company to post a loss of 33 cents per share on revenue of $387.04 million.

Early in October, Ciena reaffirmed its financial guidance for the fiscal fourth quarter ending October 31, 2010. Ciena expects a sequential increase in its fourth quarter revenue of up to 5 percent, which, based on third quarter results, reflects a revenue range of approximately $390 million to $409 million. Ciena also expects adjusted gross margin in the low 40s percent range.

The communications equipment industry has shown significant growth this year. As corporations become more mobile, connection solutions allowing employees to connect directly with the corporate server are growing in appeal. Businesses are looking for faster options and equipment makers that offer these options have the opportunity to bolster their top lines. With such growth potential throughout the industry, companies are fighting harder than ever to secure their respective niches. At the moment there is massive demand for mobile internet -- and demand is only likely to grow going forward - and telecom customers are typically looking for smooth transitions to 3G or 4G networks. 

However, Ciena's near-term results are expected to remain under pressure due to heightened competition, increased expenses, volatile European market, a slowdown in carrier spending and continued losses.

Among other developments, Ciena completed the sale of $350 million of unsecured convertible senior notes bearing an interest rate of 3.75%, which will come due in October 2018. The additional funding, along with current cash and cash equivalents, gives Ciena nearly $800 million in cash with which to fund operations, including R&D.

In terms of stock performance, Ciena shares have gained nearly 45% since the beginning of the year. 

Full Disclosure: None.
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