Ciena falls 25 percent

The Baltimore Sun

Linthicum-based Ciena Corp., the maker of network equipment for AT&T; Inc., yesterday had its biggest drop in Nasdaq trading in seven years after its fourth-quarter revenue forecast trailed analysts' estimates as customers delayed orders.

Sales for the three months ended Oct. 31 will be $190 million to $210 million, Ciena said in a statement yesterday. Thirteen analysts predicted $262.2 million, on average, in a Bloomberg survey.

Customers haven't canceled orders, though sales cycles are lengthening, Ciena said in the statement. Some clients are delaying purchases due to "their guarded approach to capital expenditures" as the economy struggles, according to the statement.

Ciena tumbled $4.34, or 25 percent, to $13.09 yesterday - its steepest decline since August 2001. The shares have slumped 62 percent this year.

Ciena Chief Executive Officer Gary Smith, while declining to make a prediction for the quarter ending in January, said demand for telecommunications equipment isn't falling.

"If you look at the demand drivers for the large carriers, the need for capacity is increasing," Smith said in an interview. "Carriers have not built their networks way ahead of capacity." He said Internet traffic will grow by 50 percent this year, the same as last year.

Net income for the third quarter that ended July 31 fell 59 percent to $11.7 million, or 12 cents a share, the company said. Ciena had predicted a net loss of $5 million to $6 million tied to commercial paper issued by two structured investment vehicles, or SIVs.

Sales climbed 24 percent to $253.2 million. International revenue accounted for 38 percent of sales, compared with 30 percent in the quarter ended in May.

The slowdown in orders is "predominantly in North America," Smith said during a conference call.

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