Ciena beats Street, shifts management

(Telephony) Ciena soundly beat Wall Street estimates for its second fiscal quarter 2001 while announcing a change in its top management.

Effective immediately Patrick Nettles, Chairman and CEO of Ciena since1994, is assuming the post of executive chairman. Gary Smith, president and chief operating officer will take over as president and CEO.

“Gary has been instrumental in Ciena’s growth and success since joining us in 1997,” said Nettles. “In his previous capacity as COO, Gary was handling the majority of Ciena’s day-to-day business issues and I expect the transition to CEO will be a smooth one for him.

For the quarter ending April 30, Ciena reported revenue of $425.4 million, up from $352 million in the first quarter and $185.7 million year over year.

Net income excluding one-time charges was $65.4 million, or 20 cents per share, well ahead of the consensus analyst estimate of 16 cents taken from First Call/Thompson Financial.

The largest contributor to Ciena’s revenue for the quarter was CoreStream, Ciena’s DWDM optical transport system, and CoreStream-related products, the sales of which were up 50% sequentially.

One-time items resulted in charges of $75.7 million, though, creating a net loss of $50.7 million, or 17 cents per share. Much of this loss is due to the acquisition of Cyras Systems, as well as payroll taxes on stock option exercises and amortization of intangibles and goodwill.

While the company reaffirmed its guidance of 95% to 105% revenue growth year over year, there was some indication that Ciena could be materially affected by the slowdown.

Inventories were up to $276 million from $207.6 million in the previous quarter, due to the ramping up of the CoreDirector optical switching system; customer acceptance of this product is expected to be slower than other products Ciena has introduced, according to customer sources.

In addition, Smith said Ciena could be affected by downward pricing pressure in upcoming quarters. This pressure could drive down gross margins as much 100 basis points from the second to the third quarter.