Ciena 4Q results send stock up 23%

Telecom firm's sales increase 16 percent

December 10, 2004|By William Patalon III | William Patalon III,SUN STAFF

Ciena Corp. shares jumped 23 percent yesterday after the battered maker of telecommunications gear reported better-than-expected results for its fiscal fourth quarter - and said first-quarter sales would top estimates.

Ciena, based in Linthicum, said sales in the three months that ended Oct. 31 rose 16 percent to $82 million over the comparable period last year - better than the $76.3 million analysts had expected. And the company said it expected sales to keep growing in the current quarter, to as much as $90 million.

The company reported a net loss of $495.1 million, or 87 cents per share, after one-time charges of $461.2 million - including a $371.7 million write-off of goodwill on several companies Ciena acquired this year. That compared with a net loss of $115 million, or 24 cents per share, for the comparable quarter last year. Excluding the charges, Ciena's loss was $33.9 million, or 6 cents per share - a penny less than the 7 cents estimated by analysts surveyed by Zacks Investment Research.

Ciena's shares gained 54 cents yesterday to close at $2.88. They are down 56.1 percent this year.

"The quarter was definitely a positive - both in terms of revenue [growth] and expense controls," said Joseph Chiasson, a telecommunications analyst for Susquehanna Financial Group in Boston. "Yet, there's clearly a long way to go in the large scheme of things" to gauge the progress of Ciena's plan to specialize in high-growth niches of the telecommunications-equipment market.

In late October, Ciena unveiled a "repositioning" strategy and branded itself as a "network specialist," articulating changes that were already under way, and that may have helped fuel the surge in revenue in the fourth and current quarters.

Instead of focusing on hard-pressed long-distance telephone companies burdened by too much capacity, Ciena is targeting providers of broadband and video, government agencies, and other customers who are still purchasing equipment in hopes of providing new services. Ciena is also working to sell its wares through other channels, including an undisclosed national retailer.

"There is more work to be done, but we have made meaningful progress in a number of strategic areas," said Gary Smith, Ciena's president and chief executive officer. "In addition to expanding the breadth of product we are selling to existing customers, we also have developed new channel partnerships. These actions support our specialist approach to the market and our focus on specific applications that have a major impact on our customers' businesses."

The goodwill write-offs in the quarter were related to the purchases of Catena Networks Inc., a broadband access company, and Internet Photonics Inc., a supplier of Ethernet transport and switching products. Ciena announced in February that it was buying the two firms for nearly $640 million in stock. The two companies were folded into Ciena business units after their purchases were completed.

For the fiscal year, Ciena reported a net loss of $789.5 million, or $1.51 per share, compared with a net loss of $386.5 million, or 87 cents per share, for fiscal 2003.

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