Ciena reports narrowed net loss for third quarter

Linthicum company posts $51 million deficit

September 02, 2005|By William Patalon III | William Patalon III,SUN STAFF

Ciena Corp. yesterday reported a significantly narrowed net loss for its fiscal third quarter - the Linthicum-based telecom-equipment manufacturer's 16th straight quarter in the red - although its chief executive officer vowed the company would get back to break-even during its next fiscal year.

"We intend to get back up to break even during [fiscal] 2006," CEO Gary B. Smith said. "We're not that far away." The company's fiscal 2006 begins Nov. 1.

For the third quarter that ended July 31, Ciena reported a net loss of $51.03 million, or 9 cents per fully diluted share. That was a major improvement from a net loss of $141.47 million, or 25 cents per share, for the comparable quarter a year earlier.

Excluding certain nonrecurring costs, Ciena said its loss for the quarter declined to 4 cents per share, roughly in line with analyst estimates. Third-quarter revenue of $110.48 million was slightly better than the consensus analyst estimate, and was an improvement of more than 46 percent from the $75.6 million in revenue for the same period a year earlier, the company reported.

Ciena's shares declined 10 cents each, or nearly 4.5 percent, on the Nasdaq system, to close at $2.15 yesterday.

The company did a good job boosting revenue, expanding profit margins and controlling expenses, said Joseph Chiasson, a telecommunications equipment analyst for Susquehanna Financial Group, an institutional brokerage house in Boston. Chiasson does not own any Ciena shares.

However, even with the targets for improvement Ciena has established in those three key areas - sales, margins and expenses - Chiasson and others contend it will be difficult for the company to reach break-even in the near term.

For instance, while Ciena is projecting revenue growth of up to 5 percent in the current quarter, meaning sales would total as much as $116 million, analysts estimate that the company needs to average $140 million to $170 million a quarter in revenue to meet costs and break even. Chiasson said he can't see sales making such a leap in a short period.

But Smith, the CEO, said the company's strategies are paying dividends, helping land contracts abroad and wrest market share from competitors. Ciena has focused its resources on specialized markets where demand will continue to be strong, such as gear for high-speed networks and the products and services that federal agencies need to operate fast, but highly secure communications networks.

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