Ciena Rally Keeps Building

Updated from 9:25 a.m.

Ciena (CIEN Quote) soared 14% Thursday after the networking gearmaker beat second-quarter targets and raised guidance, citing a strong "demand pipeline."

The Linthicum, Md., optical networking company made $13 million, or 14 cents a share, for the quarter ended April 30, reversing the year-ago loss of $1.9 million, or 2 cents a share. Sales rose 17% sequentially and 48% from a year ago to $193.5 million.

On a non-GAAP basis, excluding certain costs, earnings rose to 26 cents a share from 6 cents a year ago. Analysts surveyed by Thomson Financial were looking for a 25-cent profit on sales of $180 million.

Ciena said its gross margin was 42.3% for the quarter, including a 47.3% product gross margin.

"Given the demand pipeline we see today, we expect to deliver fiscal third-quarter revenue growth of up to 5% from our fiscal second quarter," said CEO Gary Smith. That puts third-quarter revenue as high as $202 million -- well above the $188 million Thomson Financial analyst consensus estimate.

Smith also said Ciena is "increasing our fiscal 2007 annual growth expectations from between 27%-30% growth to up to 36% growth," pointing to full-year revenue as high as $767 million. Analysts were looking for $732 million.

"In addition, the visibility we have into anticipated product mix leads us to believe we will be able to achieve this growth while delivering gross margin in a mid-40s range in our fiscal third quarter," said Smith. "Successfully achieving our revenue and gross margin goals would put us on track to achieve a significant milestone of 10% income from operations on an as-adjusted basis as soon as our fiscal third quarter 2007."

Shares zoomed $4.03 to $33.31 after earlier hitting a 52-week high at $34.18.