Along similar lines, I don't believe that Ciena's management has received the credit it rightfully deserves for having navigated this tough carrier spending environment as well as it has, especially since carriers account for more than 30% of the company's revenue.
Profitability has also begun to trend in the right direction, with gross margins advancing roughly 3% year over year. More impressive, however, was the 14% jump in operating income, which demolished Street estimates by 60%. What this tells me is that management has shifted its focus towards returning value to shareholders.
What's more, given that Ciena has secured product wins from the likes of
, the company is also gaining market share in some very important categories. It's evident that companies are looking for ways to differentiate themselves by delivering more value-added services to their clients.
This means that demand for network convergence with greater programmability will heighten. Very few companies have a portfolio that can offer these capabilities as well as Ciena's.
Investors should expect similar-to-better performance during the course of the next six to 12 months. Accordingly, from the standpoint of continued free cash flow and revenue growth, l see this stock as undervalued by at least 15%.
At the time of publication, the author held no position in any of the stocks mentioned
This article was written by an independent contributor, separate from TheStreet's regular news coverage.