NEW YORK (TheStreet) -- 2014 can't end fast enough for Ciena (CIEN) investors. The maker of optical networking equipment that helps businesses manage data traffic reported a $30.7 million loss Thursday in its fiscal fourth quarter.

All told, Ciena is not as bad as it looks. The company's struggles have more to do with industry trends and weak enterprise spending and less to do with its own operational deficits. Still, management must come up with a solution to better diversify the business and risk more share price declines in 2015.

On a per-share basis, the loss was 29 cents. When adjusted for things like amortization and stock option expenses, the loss was narrower: 8 cents per share, still far below the 13-cent profit analysts were looking for.

It wasn't all bad news, however. Ciena posted fiscal fourth-quarter revenue of $591 million, edging past Wall Street estimates of $589.4 million by 0.27%. This was enough to send shares higher 8.9% as of noon Thursday.

The 1.31% year-over-year revenue growth seems like the vote of confidence investors needed. But it comes with a warning too.

Ciena didn't promise great fiscal first-quarter guidance. 

For the current quarter ending in January, Ciena expects revenue to be in the range of $540 million to $570 million. Consensus estimates were projecting revenue of $568 million. And with the stock down 29.13% on the year to date, compared with the 9.62% gain in the S&P 500 (SPY) and the 5.77% gain in the Dow Jones Industrial Average (DJI) , investors need more reasons to believe Ciena can turn things around.

But there's still reason for optimism.

While Ciena has struggled this year, its main rivals like Alcatel Lucent (ALU) (down 23.86%) and Juniper Networks (JNPR) (down 5.05%) haven't done any better. In fact, their charts show a noticeable pattern of decline. This is because of heavy competition for corporate infrastructure spending.

The problem is that businesses have tightened their spending for most of 2014. And Alcatel Lucent, Juniper and Ciena have fought over a smaller pie.

As bad as Ciena's year-over-year revenue growth of 1.31% may seem, consider Juniper's most recent quarter. It posted a 5% year-over-year revenue decline. Alcatel Lucent was even worse, posting a year-over-year revenue decline of 7.03%.

Only Cisco (CSCO) , another enterprise networking competitor has managed to do better in terms of stock gains.

Cisco's shares are up 19.79% in 2014, beating both the Dow and S&P 500. Yet, in its most recent quarter, Cisco delivered year-over-year revenue growth of just 1.32%, as shown in the chart.

The main difference between Cisco and Ciena is one thing -- albeit an important one. Cisco is better diversified and has multiple revenue streams.

Ciena's main customers include carriers like Verizon (VZ) and AT&T (T) . AT&T accounts for more than 21% of Ciena's total sales, up from 18.8% in the March quarter. This year, however, carriers haven't spent as much on infrastructure builds as some industry experts predicted.

That hasn't been enough to offset the weakness Ciena is facing in international markets, where it generates for 42% of its sales. This same issue has impacted Cisco, Alcatel Lucent and Juniper too.

If Ciena's other businesses mimic its converged packet optical division, Ciena will be a strong turnaround candidate in 2015. That business now accounts for more than 60% of the company's total revenue. But it needs to do more of the heavy lifting in terms of profits.

 

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TheStreet Ratings team rates CIENA CORP as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate CIENA CORP (CIEN) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year."

You can view the full analysis from the report here: CIEN Ratings Report

This article is commentary by an independent contributor. At the time of publication, the author held no position in the stocks mentioned.

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