Ciena ( CIEN) said Thursday that it will serve as British Telecom's ( BTY) main provider of optical transport, software and switching equipment for the next three years.

Ciena's shares were up 2.3% at $4.99 in afternoon trading. But the deal, although valued at $200 million, isn't expected to get Ciena out of the woods yet, some say.

"This is certainly a positive, but it's a drop in the bucket for Ciena," said Rick Schafer, telecom analyst at CIBC World Markets, who calculates that the company would need to triple its revenue to break even this year.

The widely expected deal will take effect in October, Ciena's fiscal 2003 year end. Full terms of the deal weren't disclosed.

Schafer predicts the deal would help the company narrow its loss to 41 cents a share in 2004, from an expected loss of 46 cents a share this year. Analysts polled by Thomson First Call are betting on a loss of 40 cents per share in 2003.

In order to improve its finances, experts say, Ciena would need to cut costs dramatically, including staff reductions. Only then the company would be working on a comparable basis with its rivals, they say.