There are network expansion opportunities as far as Ciena ( CIEN - Get Report) chief Gary Smith can see. After posting adjusted fiscal third-quarter profits that beat expectations by a dime and reaffirming guidance for the current quarter, Ciena's top exec spoke optimistically Thursday about the outlook for his business. "It's like painting the Bay Bridge," says Smith of network operators' seemingly never-ending effort to modernize their technologies. "I hesitate to call this a cycle," Smith told TheStreet.com in an interview after the company's earnings conference call. "I think this is really about a whole new infrastructure being put in place." Ciena makes optical networking and advanced switching gear for telcos looking to accommodate larger volumes of traffic. The Linthicum, Md., tech shop enjoys a specialist role in a broader supply field that includes giants like Alcatel Lucent ( ALU), Nortel ( NT) and Cisco ( CSCO - Get Report). These networking-gear makers are attempting to sell new systems that convert and upgrade old phone networks to more capacious Internet-style pathways. The rising popularity of videos, file exchanges and wireless data connections "has forced telcos to find ways of carrying increased traffic more efficiently," says Smith. Smith cites customers like British Telecom ( BT). The U.K. telco is building its so-called 21st Century Network, a wide-scale conversion from a traditional phone system to a converged network where all traffic runs on Internet protocol.
"BT could take three or four years to move all the services over," says Smith. He adds that other phone companies are all coming at the upgrade plan "from different pain points in the network." Of course, this could sound a bit familiar to observers who watched the Internet construction boom collapse around the turn of the century. Smith says he's acutely aware of the parallels between "data-networks-will-take-over-the-world" claims then and now. But he says much of the earlier boom was built on speculation and flimsy businesses. Today's demand is coming from more mature industries and sustainable business models like Google ( GOOG - Get Report), for example, he says. The one major uncertainty that concerns Smith is the health of the global financial system, which has been under stress this summer as a result of the collapse of the market of mortgage-backed securities. While telecom is "not directly affected" by the credit markets, Smith says, neither is it "going to swim against the tide of the world economy." Ciena shares fell $1.18, or 3%, to $37.24 Thursday.