Ciena, Cisco Crossing Optical Paths - TheStreet

Ciena, Cisco Crossing Optical Paths

Network traffic patterns have Ciena and Cisco on a collision course.
Publish date:



) -


(CIEN) - Get Report

chief Gary Smith says


(CSCO) - Get Report

recent move into optical networking is a validation of the technology.

Smith said he was not surprised that

Cisco agreed to buy CoreOptics

, and sees it as a way to add 40 gigabit and 100 gigabit capability to Cisco's core Internet routers. But Smith says there's a difference between having an optical component in your router versus having a full optical system to handle network traffic.

The distinction highlights the division between two network technology camps -- electronic routers and optical switching.

"Our view of the world is one more converged around optical with Ethernet running on top," Smith says.

As network traffic volumes rise with the increase in high-definition video, music streaming and so-called cloud computing, telcos are under pressure to expand network capacity to stay ahead of the surge. Typically optical networks are strong on capacity, but weak on traffic sorting while Internet routers are superb traffic cops but limited on bandwidth.

Smith backed away from the idea that Cisco and Ciena are locked in a winner take all battle in networking.

"We have competed for a long time," says Smith of Cisco. "Routers will be around for a long, long time, and Cisco will do just fine," he added.

The comments come after Ciena posted narrower-than-expected losses sending shares up 8% Wednesday.

The Linthicum, Md. optical networking shop posted an adjusted net loss of $11.7 million of 13 cents a share, better than the $22.5 million or 25 cent loss in the year-ago period. Analysts had expected Ciena's pro forma loss to be 27 cents a share.

Sales for the company's fiscal second quarter ended April 30 were $253.5 million, up from the $144.2 million level a year ago, but below the $268.3 million analysts were looking for, according to Yahoo Finance.

Ciena says $53 million of the company's total revenue for the quarter came from six weeks of Nortel gear sales. Ciena acquired the networking business of failed tech giant Nortel earlier this year.

"We're very pleased with our progress to date in combining the two companies," CEO Gary Smith said in a press release Wednesday.

Looking ahead, Ciena says it expects sales for the fiscal third quarter to be in a range between $375 million and $400 million. That is almost in line with analysts' projections calling for sales of $388 million for the current quarter.

--Written by Scott Moritz in New York.