UPDATE 3-Ciena loss disappoints even as revenue beats view

* Adjusted Q4 shr loss $0.12 vs street view loss $0.07

* Q4 rev $176.3 mln vs Street view $167.7 mln

* Sees fiscal Q1 rev up 5 pct sequentially

* Ciena shares fall more than 9 pct (Adds analyst comment, executive comment, share price)

By Sinead Carew

NEW YORK, Dec 10 (Reuters) - Ciena Corp (CIEN.O) posted a wider-than-expected quarterly loss on higher expenses, fueling investor concerns about rising costs ahead of its acquisition of a Nortel Networks Corp (NRTLQ.PK) unit.

While the telecommunications network equipment maker's revenue and its forecast for the current quarter were well ahead of analysts' expectations, that was not enough to cheer up traders who drove Ciena's shares down more than 9 percent on Thursday.

"Despite a positive surprise on the revenue and stronger-than-expected revenue guidance, the gross margins were lower than expected and operating expenses were heavier," Miller Tabak & Co analyst Alex Henderson said.

Ciena said gross margin was 44.9 percent, well short of Henderson's forecast of 47.2 percent. But the analyst described the share fall as an over-reaction, saying profit margins would have been in line with his expectations excluding items such as a writedown for obsolete inventory.

Several analysts said investors should focus on how well Ciena performs after its $769 million purchase of Nortel's optical networking and carrier ethernet unit. Ciena had outbid Nokia Siemens Networks, a venture of Nokia (NOK1V.HE) and Siemens (SIEGn.DE), for the business.

The deal is expected to double Ciena's size when it closes in the first calendar quarter of 2010.

Ciena executives did not give specific financial estimates for the combined entity, but said they would be disappointed if the company didn't make a profit in the second half of 2010.

STRONG DEMAND

Ciena, a supplier of optical switches and other equipment used to direct Internet traffic, posted a loss of $26.7 million, or 29 cents per share for its fiscal fourth quarter ended Oct. 31, compared with a loss of $25.4 million, or 28 cents a share in the same quarter a year before.

Excluding unusual items, the loss was 12 cents a share, compared to Wall Street expectations for a loss of 7 cents a share, according to Thomson Reuters I/B/E/S.

Revenue fell to $176.3 million from $179.7 million but was well ahead of the average analyst estimate for $167.7 million. The company cited strong demand for products like carrier ethernet products and core switching platforms.

Ciena forecast a 5 percent revenue increase for the current quarter, implying revenue of about $185 million, which would be above the average Street estimate of $172 million.

Ciena Chief Executive Gary Smith said that while customer demand appeared to be stabilizing it was too soon to estimate the extent of capital spending increases for 2010.

"We are seeing early signs of market recovery but I won't attempt to predict the shape or timeline of that recovery, Smith said.

Ciena said a single North America-based customer accounted for 19 percent of its fiscal fourth-quarter revenue, but did not name the company.

Avondale Partners analyst Blair King said it was likely AT&T Inc (T.N), which is beefing up wired connections to its wireless towers to improve its network performance.

"The good news is that optical spending seems to have rebounded in North America," King said.

Ciena shares were down 9.4 percent at $11.98 in morning trade on Nasdaq. (Reporting by Sinead Carew, editing by Gerald E. McCormick, Dave Zimmerman)