Ciena drops $5.6 million in wake of acquisition

Purchase of Omnia negates net profit of third quarter

Telecommunications

August 20, 1999|By Mark Ribbing | Mark Ribbing,SUN STAFF

Ciena Corp. said yesterday that it incurred a net loss of $5.6 million, or 4 cents per share, in the third fiscal quarter, due largely to heavy acquisition expenses.

The Linthicum-based telecommunications equipment company's financial report included $10.8 million in costs related to its acquisition of Omnia Communications Inc. When those numbers are factored out, Ciena had net income of $1.5 million, or 1 cent per diluted share.

In the third period last year, the company had a net loss of $250,000, or zero per share. Excluding merger costs and other one-time charges, Ciena had net income of $13.8 million, or 10 cents per diluted share, in that period.

Ciena had $128.8 million in revenue in the latest quarter, which ended July 31, down from the $129.1 million the company earned in the corresponding quarter last year.

The earnings report was released after the close of markets. During the day, Ciena shares fell 56.25 cents to close at $33.9375.

Ciena has been haunted by its extreme reliance on a small number of customers. Last year, when two purchasers, MCI WorldCom Inc. and Sprint Corp., were accounting for nearly all of Ciena's revenue. The company's vulnerability and apparent inability to raise prices contributed to a severe late-year downturn and helped prompt Tellabs Inc. to drop its plan to buy the company.

Since then, Ciena has tried to widen its customer base. It reported having 18 buyers during the quarter for its core product, which allows fiber-optic networks to carry more traffic. In the corresponding quarter last year, there were 10.

"We're very pleased with the customer diversification shown in the quarter," said Ciena President and Chief Executive Officer Patrick H. Nettles.

"It shows that they're able to get the customers, so they're able to compete against the larger companies," said David Toung of Argus Research Corp. in New York. "That means no one customer has as much leverage."

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