Ciena Shares Drop on Warning of Tech Spending Decline - TheStreet

Ciena Shares Drop on Warning of Tech Spending Decline

Ciena beats third-quarter-earnings forecasts, but it warns that a slowdown in orders tied to the pandemic will hurt revenue.
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Ciena  (CIEN) - Get Report shares were tumbling Thursday after the telecom-networking equipment, software and services company warned that major customers are trimming their tech spending due to the coronavirus pandemic.

Shares of the Hanover, Md., telecom supplier were falling 25% to $44.97.

Ciena beat Wall Street's third-quarter earnings expectations, but said a slowdown in orders related to the coronavirus outbreak would hurt revenue for "a few quarters."

The company reported net income of $142.3 million, or 91 cents a share, up from $86.7 million, or 55 cents, in the year-earlier quarter. Adjusted earnings per share came to $1.06, beating FactSet's call for 83 cents. 

Revenue rose 1.7% to $976.7 million, ahead of FactSet forecast for $972.8 million.

“We are seeing negative effects of the pandemic, and greater economic uncertainty weigh on our near-term outlook,” Chief Executive Gary Smith said on the earnings call, according to Bloomberg 

“We believe that this has been driven by an impact on the velocity and to some extent deprioritization of new business initiatives in general.”

Smith told Bloomberg in an interview that "some large segments of enterprise businesses are suffering quite badly, especially areas like transport, hospitality, restaurants, etc.” 

While the need for networking gear looked stable due to a surge in videostreaming, teleconferencing and online shopping brought on by the pandemic, major carriers are cutting back on spending in response to less demand from customers.

"The overall demand for bandwidth is very strong, and while we aren’t immune to the overall economic recession, I think we are in a better place than most given the demand for bandwidth,” Smith said. “But personally, I think the general economy has not really absorbed all the gyrations yet of what’s going on.”