Ciena forecast weak as carriers delay projects; shares fall

Thu Aug 30, 2012 9:27am EDT

(Reuters) - Network equipment maker Ciena Corp CIEN.O posted a higher-than-expected quarterly loss and forecast fourth-quarter revenue below estimates as customers delayed orders, sending its shares down 12 percent in premarket trading.

Ciena's soft outlook dragged down shares of other network gear companies, days after Cisco System Inc's (CSCO.O) surprise dividend hike came as a relief to investors in a sector hit by slowing technology spending.

A faltering U.S. recovery and weakness in Europe has hurt network equipment makers as their biggest customers, telecom service providers, cut spending and delay purchase of new equipment.

"We are experiencing the effects of ongoing macroeconomic challenges and slower than expected roll-outs of new design wins," CEO Gary Smith said on Thursday.

Europe continued to be the company's weakest market and had deteriorated during the third quarter, Smith said on a conference call with analysts.

He added that though North America had held steady, customers were exercising more caution.

Ciena, which makes optical switches used by telecom carriers such as AT&T Inc (T.N) and Verizon Communications Inc (VZ.N) to manage load on their networks, had said earlier this year it expected business to improve in the later half of 2012.

Net loss narrowed to $29.8 million, or 30 cents per share, in the third quarter, from $31.5 million, or 33 cents per share, a year earlier.

Excluding items, the company posted a loss of 4 cents per share, compared with analysts' expectation of a 2 cents per share loss, according to Thomson Reuters I/B/E/S.

Revenue rose 9 percent to $474.1 million, in line with estimates, but gross margin slipped about 4 percentage points.

The company forecast fourth-quarter revenue between $455 million and $480 million.

Analysts expected revenue of $499.7 million.

Shares of the company, which closed at $16.72 on the Nasdaq on Wednesday, fell to $14.84 in trading before the bell. Juniper Networks Inc (JNPR.N) shares fell 2 percent, while Cisco (CSCO.O) was down about 1 percent in premarket trading.

(Reporting by Sayantani Ghosh in Bangalore; Editing by Saumyadeb Chakrabarty)

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