Ciena narrows loss, but shares drop 11%

Stock price is hammered after Linthicum company signals more bleak results

December 12, 2003|By BLOOMBERG NEWS

Ciena Corp., the fourth-biggest U.S. maker of fiber-optic network equipment, said yesterday that its fiscal fourth-quarter net loss narrowed to $115 million as expenses declined.

Ciena's shares fell 11 percent after the company said its loss this quarter will be wider than analysts expected.

The fourth-quarter loss narrowed to 24 cents a share from $754.8 million, or $1.75 a share, in the year-earlier period that ended Oct. 31, Linthicum-based Ciena said. Sales rose 14 percent to $70.6 million.

Ciena said both its loss and revenue for the quarter that ends in January may be worse than analysts forecast.

The company, which is reducing costs and selling newly acquired products in a bid to return to profitability, has cut more than 2,000 jobs and racked up nine straight quarterly losses after telephone carriers reduced spending on network gear.

"This company is a long way from breaking even," said Steven Levy, a Lehman Bros. analyst in New York who has an "under- weight/positive" rating on Ciena and doesn't own the stock.

Ciena expects a fiscal first-quarter loss of 8 cents to 10 cents a share, excluding certain expenses such as debt-buyback costs, Chief Financial Officer Joseph Chinnici said during a conference call. Analysts surveyed by Thomson Financial forecast a loss of 7 cents.

The company predicted that first-quarter revenue will be unchanged or up to 10 percent higher than in the fourth quarter, or between $70.6 million and $77.7 million. The average estimate of analysts is for sales of $77.7 million.

Ciena's shares lost 17 cents, or about 2.7 percent, to close at $6.18 yesterday in Nasdaq trading, after falling as low as $5.63. The stock, which had increased 24 percent this year, is down from a high of $151 in October 2000.

Levy, who expects that Ciena will return to profitability in 2006, said the company needs about $150 million in quarterly sales to break even.

"The guidance leaves you a long way" from reaching the break-even target, he said.

Ciena, whose customers include No. 2 U.S. local-phone provider SBC Communications Inc. and cable-television operator Cox Communications Inc., plans to cut operating expenses as much as 20 percent in fiscal 2004.

It has been forced to pare jobs and costs as it awaits a rebound in network spending.

Phone companies slashed equipment budgets after building optical networks in the 1990s in preparation for a demand surge that never occurred.

Ciena's fourth-quarter operating expenses tumbled to $133.6 million from $753 million, helped by a 95 percent decline in costs for writing down the value of acquired assets. Costs related to job reductions fell 84 percent to $12.9 million.

The cost of goods sold declined 8.9 percent to $48.6 million. Interest expense fell by half, to $7.99 million.

Ciena is trailing larger rivals in returning to profitability.

Lucent Technologies Inc. posted its first net income in 14 quarters for the period that ended Sept. 30. Nortel Networks Corp. had net income in the past three quarters and has forecast its first annual profit in six years in 2003.

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