Ciena Gears Up for Recovery

LINTHICUM, Md., (TheStreet) -- Ciena (CIEN Quote) sees a sliver of hope in tech spending.

With the worst of the financial crisis presumably over and phone companies scrambling to accommodate higher traffic levels, Ciena chief Gary Smith is slightly optimistic about his networking equipment business.

"The trajectory is in the right place," Smith told TheStreet. "We see stability in North America, and we think Europe may lag that a bit."

Smith's comments follow the Thursday release of Ciena's fiscal third-quarter results, which beat profit, margin and sales targets.

Ciena shares got a 5% boost from the upbeat talk and solid numbers, but the enthusiasm was somewhat muted as the company set sequentially flat targets for the current quarter.

The head-fake on guidance was similarly mixed on an earnings conference call with analysts. Smith refused to say whether order levels had rebounded from early this year. But he shared other info that sounded encouraging. Smith's staffing plan, for example, was to hire more and fire less employees. This would be a sign, arguably, that Ciena may have turned a corner after a bruising period of revenue declines and cost cuts.

Ciena has had to balance its goals of increasing spending on research and development while keeping cash flow out of the red. Pushing product development in the downturn gives Ciena a "strategic advantage coming out" of the tech spending slump, said Smith in the interview.

Ciena's role as a networking specialist focused on optical and Ethernet equipment gives it a somewhat more sheltered position than some of its larger rivals like Cisco(CSCO Quote) and Alcatel-Lucent (ALU Quote). Shares of maller gear peers like Juniper (JNPR Quote), and network testing shop EXFO (EXFO Quote) were up 1% and 6% by midday Thursday.