Ciena shares slump after outlook disappoints
NEW YORK (Reuters) - Ciena Corp CIEN.O forecast on Thursday a sharp slowdown in annual revenue growth, driving its shares down 10 percent as investors had expected a more bullish view on equipment sales to telecoms carriers.
Ciena, a leading provider of optical switches and other networking gear, also reported higher-than-expected profit for its fiscal fourth quarter ended October 31, but that was overshadowed by the outlook for fiscal 2008.
The company said it expects revenue growth to slow to 20 percent in the new fiscal year from 38 percent in fiscal 2007. Before the fourth-quarter results announcement, analysts on average had expected 22 percent growth, according to Reuters Estimates.
"We view the outlook as disappointing. That said, it appears the company is being conservative," said Todd Koffman, an analyst at Raymond James.
Analysts noted that Ciena appeared particularly insecure about the full year considering its upbeat forecast that first-quarter revenue would rise 5 percent from the fourth quarter. Wall Street had been looking for a 2.4 percent increase, according to Reuters Estimates.
"We've got better visibility in (the first and second quarters), and I think it's a function of the further out you go, you have less visibility to it," Ciena Chief Executive Gary Smith told analysts on a conference call, adding that there could be "upside" to its outlook.
In a phone interview with Reuters after the call, Smith noted that Ciena's 38 percent revenue growth in 2007 had far exceeded an earlier company forecast of 20 percent.
He shrugged off concerns about a slowdown in U.S. corporate technology spending. Non-telecoms customers, including banks and manufacturers, account for 15 percent of its business and are a growing source of revenue, he said.
"We're actually seeing increased activity in that area, frankly," he said. "We actually feel pretty good about that sector from Ciena's perspective."
Fourth-quarter profit rose to $30.4 million, or 30 cents per share, from $13.1 million, or 14 cents a share, a year earlier, Ciena said.
Excluding special items, earnings doubled to 48 cents per share from 24 cents, exceeding analysts' average forecast of 43 cents, according to Reuters Estimates.
Fourth-quarter revenue rose 35 percent to $216.2 million, compared with the average Wall Street estimate of $211.6 million. During the quarter, key sales included an optical switching deal with Indian telecom company Videsh Sanchar Nigam Ltd VSNL.BO.
Ciena also said British telecoms giant BT Group Plc (BT.L), which already buys Ciena's optical ethernet transport and switching equipment, is buying its CN 3000 ethernet access products.
The fourth-quarter profit included a $13.0 million loss related to investments in commercial paper issued by SIV Portfolio Plc and Rhinebridge LLC, two structured investment vehicles that failed to make payment at maturity.
Ciena said it may incur additional losses from those investments in fiscal 2008.
The company also named James Moylan to succeed outgoing Chief Financial Officer Joseph Chinnici. Moylan was previously CFO at Swett & Crawford, a private equity-owned wholesale insurance broker.
Ciena shares fell $4.24 to $37.88 in morning Nasdaq trade.
(Editing by Lisa Von Ahn and John Wallace)