Ciena Corp. first-quarter loss leads to drop in shares

March 04, 2010|By Gus G. Sentementes | gus.sentementes@baltsun.com

Ciena Corp., a Linthicum-based maker of telecommunications networking equipment, posted worse-than-expected quarterly financial results on Thursday, leading to a short drop in its shares.

The company missed its revenue expectations during a time when analysts and investors are closely watching how it deals with operational challenges. Later this month, Ciena is expected to close on its purchase of Nortel's Metro Ethernet Networks division, which it acquired for $769 million and which will effectively double Ciena's size.

Ciena, which makes gear that helps manage the flow of voice, video and data communications, reported revenue of $176 million in the quarter that ended Jan. 31 – an improvement over the $167 million it had in the fiscal first quarter a year ago. Wall Street analysts had expected $184 million in revenue during the recent quarter.

The company posted a quarterly net loss of $53.3 million, or 58 cents per share, compared with a loss of $24.8 million, or 27 cents per share, in the same period a year earlier.

Shares of Ciena closed Thursday at $13.97 — down 58 cents, or 4 percent.

Gary Smith, Ciena's chief executive, said in a statement that Ciena had some trouble booking revenue in connection with the deployment of new systems for some of its customers. But the amount of new orders in the quarter remained strong, he said.

Michael Genovese, a principal analyst with Soleil Securities in New York, said Ciena had orders but ultimately couldn't book about $9 million in revenue, which led to their shortfall for the quarter.

"I think in investors' minds, it highlights sloppy execution in front of this big Nortel deal, which is about to close and which is going to demand real crisp execution," Genovese said.

He gave Ciena credit for performing better than other telecommunications equipment vendors in a tough economic climate, but he said investors can't help but feel uneasy about how the company will integrate the Nortel division.

"I think people are nervous," Genovese said.

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