Ciena posts loss; outlook poor

Ciena today reported revenue an adjusted net loss for the first quarter of $56.7 million or 17 cents per diluted share on revenue of $162.2 million. Simultaneously, the company warned that its second-quarter revenues would be “in the neighborhood” of $100 million, a significant drop from previous expectations.

That loss was less than the company’s guidance given on February 5 in part because of lower than expected operated expenses.

Portending future difficulties though, the company said two of its largest customers would be buying significantly less equipment than in previous quarters. Though they wouldn’t provide specifics on the identity of the customers, Ciena President and CEO Gary Smith told analysts that the company is working off of very recent information from both companies, including one specific conversation yesterday.

On a segmented basis in the first quarter, the company’s long-haul product revenue, anchored by the CoreDirector, was down more than 60%. Also, for the first time quarterly revenue from channel cards was higher than from system sales. Ciena’s gross margin also fell significantly--from 39.8% to 13%--due to increased inventory obsolescence costs, lower manufacturing volume and a product mix that included more low-margin service and support revenue.

In the second quarter, the company expects CoreDirector revenues to remain flat at best.

“Given the mix, if we’re in that revenue range it’s unlikely [CoreDirector] is going to be up,” said Smith. “My sense is that it may possibly be down if we’re in that $100 million neighborhood.”