NEW YORK (TheStreet) -- The world of investing can be a funny place sometimes, in that, every now and then you come to realize that you are beating up on a company that you once spent so much time defending.Telecommunications equipment maker Ciena ( CIEN) serves as the perfect example. It's a company that I've always liked for its technology. But on the heels of its recent earnings announcement, wanting to give it the benefit of the doubt has become tough. Though a painful death is far from imminent, I just don't think the stock is worth the risk.
The potential return doesn't justify the risk. If Ciena can demonstrate significantly improved operating margins while growing market share with carriers such as AT&T ( T) and Verizon ( VZ) then I might change my mind. On that note, if there is one for Ciena to be optimistic about, it is that carrier spending will soon return. The group, which includes (among others) Comcast ( CMCSA) and the aforementioned AT&T and Verizon, have not opened their wallets to spend as expected. At least not according to their long term needs. One has to wonder that at some point they will and Ciena stands to see a significant portion of that revenue. That said, investors have to wonder what Ciena intends to do about its massive pile of $1.4 billion in convertible debt -- one that has the potential to translate into 55 million additional shares. Also, I wonder if management will be able to overcome the product roll-out challenges it faced in the recent quarter. If and when Ciena's customers are able to spend, will it have sufficient supply to fill demand or will rivals such as Alcatel-Lucent ( ALU) or even a more prominent name such as Cisco step in and deliver where Ciena can't.