Ciena Corp. reported yesterday that its losses narrowed even as its revenue fell during its fourth quarter and said that sales next quarter are expected to increase up to 10 percent from this quarter.
Wall Street welcomed the news, sending shares of the Linthicum-based fiber-optic equipment maker up $1.02, or nearly 20 percent, to close at $6.20.
But not all analysts were upbeat about the numbers.
"I think that they're going to need a significant sales increase - not a 10 percent or a 15 percent, but I mean they need to get back into the hundreds," said David Gross, a senior analyst who covers optical networking for Communications Industry Researchers Inc.
Ciena reported a net loss of $754.8 million, or $1.75 per share, on revenue of $61.9 million for the quarter that ended Oct. 31. That compares with a net loss of $1.8 billion, or $5.51 per share, on revenue of $367.8 million posted for the corresponding period of last year.
The company told analysts during a conference call yesterday that excluding one-time charges - such as goodwill and restructuring charges - its net loss in the quarter was $63.2 million, or 15 cents per share.
The numbers exceeded analysts' expectations of a 17 cents-per-share loss, according to a survey of 25 analysts by Zacks Investment Research.
For the year, Ciena had a net loss of $1.6 billion, or $4.37 per share, on revenue of $361.2 million. During 2001, the company had a net loss of $1.8 billion, or $5.75 per share, on revenue of $1.6 billion. The net loss for 2002 excluding one-time charges was $415 million, or $1.13 cents per share.
The numbers come at a time when the entire telecommunications sector is struggling with cutbacks. Gary B. Smith, Ciena's president and chief executive, called the company's news encouraging. "I think it's some testament to our strategy being successful, but I would also say we've got a long way to go," he said.
Ciena also said yesterday that it is paying down $97.1 million of the $300 million in debt it acquired when it bought ONI Systems Corp. of California in June. By paying the debt now instead of when it is due in 2005, Ciena said, it saved $21.9 million.
But Gross said the issue for Ciena is the rate at which it is burning through cash and its continuing operating expenses. Ciena's revenue during the quarter, for instance, was about equal to what it spent on research and development.
"Clearly, it looks like there's still a lot of fat that could be cut at the company," Gross said.
Smith said Ciena has taken several steps to cut costs, including reducing its work force. The company's plan is to continue to innovate, finance research and development and build its sales team and return to profitability by managing operating expenses while growing revenue and gross margins.
Gross and Mark Lutkowitz, who is vice president of optical networking research for Communications Industry Researchers, believe that to succeed, Ciena must focus on its strengths, such as long-haul equipment that directs information from city to city on a fiber-optic network.
"It just seems to me that they can blame the market as much as they want, but they've got to be concerned about the long-term implications and not just concerned with how much in sales they can get in one particular quarter," Lutkowitz said.