Aug 31, 2006 11:43 AM,

Sales of Ciena's MSTP 'going crazy' overseas

By Ed Gubbins

In what one analyst called a "lovely quarter," Ciena reported $152.5 million in revenue for its fiscal third quarter, beating analysts' average expectations by nearly 7%. Revenue was 16% higher than in the previous quarter and 38% higher than a year earlier. Meanwhile, the company's net loss increased sequentially from $1.9 million (or less than $0.01 per share) to $4.3 million (or $0.01 per share).

Revenue in the quarter was driven in large part by sales of channel cards in long-haul equipment to a major customer (presumably AT&T). Long-haul transport equipment revenue more than doubled sequentially in the quarter to $52 million.

But Ciena was also particularly proud of the sales growth it saw from the CN 4200 multiservice transport platform it introduced in May of last year. Ciena reported $11.5 million in revenue from the 4200 in the quarter, roughly the same as in the previous quarter. But the company shipped about $22 million worth of 4200s during the quarter, with half of those shipments awaiting the fulfillment of revenue recognition requirements.

"It's not delays, just the normal sequence of shipping, installing and [recognizing revenue]," said Chief Financial Officer Joe Chinnici. "You've got to get it installed, and [customers] won't pay you until after that happens."

Ciena is "very much on the way" to achieving its goal of shipping $40 million in revenue per quarter from the 4200 alone, Chinnici said.

Sales of the 4200 to North American cable operators and certain large enterprises here are growing. But North American telcos aren't buying it with as much zeal as their counterparts in Europe, Chinnici said. "It's going crazy in Europe." Some of the quarter's revenue came from Ciena's role supplying British Telecom's 21st Century Network deployment, which includes the 4200.

The 4200 uses sub-wavelength grooming--grooming in 155-Mb/s increments--and what Ciena calls "dynamic wavelength routing," offering carriers a per-port level of flexibility, with software that allows any service to be remotely programmed to any port.

Ciena added 34 employees in the quarter for a total headcount of 1422. The company expects staffing and research and development to stay flat in North America but grow in India, where Ciena now has about 80 employees. By this fall, the company expects to employ more than 100 engineers in India, but its facilities there are capable of housing a staff of 300.

The company expects fiscal fourth-quarter revenue to be up as much as 5% sequentially.