Ciena reports net income gain, landing of `substantial' contract

Analysts upbeat on news of Linthicum firm's new, `undisclosed' customer


February 18, 2000|By Mark Ribbing | Mark Ribbing,SUN STAFF

Linthicum telecommunications-equipment maker Ciena Corp. reported sharp gains in net income and revenue for its fiscal first quarter yesterday, but what really interested analysts was the company's coy disclosure of a "substantial" new sales contract.

"The numbers themselves were fine," said James C. Kedersha of S. G. Cowen Securities Corp. in Boston, who said Ciena's earnings slightly exceeded expectations.

But analysts were more excited by Ciena's words than its numbers. In a statement accompanying the earnings figures, Ciena said it had "received a substantial purchase order -- from a new, undisclosed customer." The statement went on to say that the customer's demands were "immediate" and "substantial equipment shipments" will be made in the company's fiscal second quarter.

In a question-and-answer session with analysts yesterday evening, Ciena officials declined to give any further information about its new customer. It said only that the equipment being bought is Ciena's CoreStream technology, which increases the amount of traffic a communications network can handle.

There was speculation yesterday that the buyer might be Qwest Communications International Inc. of Denver. Qwest's name had also been mentioned Feb. 10, when Ciena's stock shot up 18 percent on rumors of a big new sale.

Kedersha said the prospect of such a sale is important because "there's still a bit of a knock on Ciena" that the company has some trouble getting major new clients. "This shows they can do it," he said.

Ciena's net income for the quarter, which ended Jan. 31, was $9.1 million, or 6 cents per share; in the corresponding quarter of the previous year, the company incurred a net loss of $1.9 million, 1 cent per share.

The company's revenue for the quarter was $152.2 million, a 52 percent gain over the $100.4 million it took in over the corresponding period in 1999.

"We are pleased with the quarter's results, and we are excited by the tone of the business that we see going forward," said Ciena President and Chief Executive Officer Patrick H. Nettles.

The earnings report was released after the close of markets. During the trading day, Ciena shares slipped $4.125 to close at $113.5625.

The stock had rocketed 18 percent on Wednesday on speculation that another telecommunications gear maker, Juniper Networks Inc. of Mountain View, Calif., might try to buy Ciena. Both companies have declined to comment on the acquisition rumors.

"I think the stock is down because people are realizing the merger isn't going to happen, at least not right away," said David Toung of Argus Research Corp. in New York.

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