In the Spotlight: Ciena's CEO Gary Smith

Ciena reported better-than-expected revenue and a reduced net loss in its third fiscal quarter last week, citing a surge of activity in North American long-haul and metro optical networks that it hadn’t seen in years. Ciena’s CEO Gary Smith spoke with Telephony’s Ed Gubbins shortly after the company’s earnings call.

On new activity in North America: What we’re seeing overall--we saw it in Europe first, and we’re seeing it now in North America--is one or two carriers beginning to order cards and chassis for capacity constraints. I’d characterize it as both on the metro and long-haul transport and switching sides; you’re seeing some activity we’ve not seen for a while from the existing customer base. I think that’s what’s driving some of this growth in the metro market as well; that’s a little more difficult to tell. The logic behind that, I guess, is just the amount of access broadband being deployed out there and the continual growth in traffic. The other thing that’s probably less apparent but also a driver to it is the backhauling of wireless traffic. You see it in Europe with 3G, it’s a little more pronounced, but I think it’s beginning to happen in North America as well. I think that’s causing two things: folks are buying extra stuff for capacity, but it’s also giving them pause for thought about their core networks. Most of them haven’t really spent anything in four years on their core networks.

On the effect of Bell/IXC mergers on network plans: They don’t seem to be [stalling network plans]. If you look at the complementary nature of the mergers, it’s two essentially long-haul players getting tied into two essentially local players. If it were two IXCs coming together, it would be a challenge. We’re not seeing any sense of that [stalling] right now. We’re fairly fortunate in that we’re providing different platforms to both parties. With MCI, we’re a long-haul metro core network [supplier], and with Verizon, it’s aggregation, DSL and metro transport. I think it’s unlikely to be as disruptive as some of the mergers during the bubble times.

On the multiservice edge: That whole market space around the multiservice edge and [the question of] do you do it from a dedicated IP platform or from a more converged platform--there’s various different architectures vying for position there, but I still think a dedicated platform, certainly for some of the high-capacity applications, seems to be the most cost-effective architecture.

On Ciena’s partnership with Laurel, which was acquired by ECI Telecom in May: There’s been no real change following the ECI acquisition. We’re still partnered with them, still engaged in a number of accounts with them. We’re still reselling and integrating those platforms into solutions into our major customers.

On Turin Networks, which Ciena CFO Joe Chinnici called Ciena’s strongest partner in February, promising customer news in coming earnings calls: We haven’t said anything public about that. It’s moving along, going well. Expect to hear more from us. We’re moving ahead on the customer engagements.

On the continuing search for more partners: It’s more about geographic spread, for them to integrate some of our platforms and solutions into broader solutions. When you look at relationships with people like EMC, to address the enterprise space, we’ve still got some geographies we don’t cover directly. So it’s more partnerships along the lines of geographic and market-segment coverage. We’ve got a broad portfolio now that can play into multiple segments; it’s really now [about] how do we leverage that.

On promises of additional offshoring: The India R&D center is more around increasing our capacity from an R&D point of view more efficiently. We’d also look to other partners in Asia to give us geographical coverage for our solutions. The India piece is more around investing in R&D capacity that will give us greater efficiency going forward, working with our U.S. teams.

On the mood from last quarter: We’re showing good progress here. It’s our sixth sequential quarter of growth, we’re 40-odd percent up on last year, 25% down on our opex and our gross margin’s going in the right direction. We’re getting there.