The Linthicum, Md., networking shop is cutting 300 jobs from across its operations, say people familiar with the plan. The 25% cutback comes just four weeks after Ciena
closed its San Jose facility.
The layoff plans show that Ciena continues to struggle in all its sales efforts. The company's new gear has proved a tough sell with tightfisted telco customers, and its once-hot CoreDirector gear isn't flying off the shelves either.
The latest round of layoffs will target workers from across Ciena's operations, including low-level executives, administrative staff, engineers and customer support employees. Entire sales teams on some accounts have been notified or will soon receive pink slips, according to people close to the situation.
The 300 new cuts come on top of the 425 jobs Ciena slashed with last month's closing of its ONI unit. The back-to-back cuts suggest that Ciena is seeing few bright sales prospects ahead, and show that the company's bold
invest-through-the-gloom strategy has backfired, say analysts and investors.
Ciena representatives declined to comment. Ciena CEO Gary Smith was in a board meeting and unable to be reached, said an assistant.
With demand for Ciena's once-coveted optical networking gear all but dried up, Smith and chief strategist Steve Chaddick decided over the last year to acquire smaller companies that aimed at other parts of the communications equipment market.
varying tastes ran toward strong technology and the potential to bring in new customers. The most recent acquisitions came in February, when Ciena bought closely held Catena Networks, a maker of broadband access systems, and Internet Photonics, which makes optical Ethernet transport and switching solutions for cable companies and businesses.
"The problem is that Ciena has been a pure play in optical, and that's were the industry's biggest weaknesses are," says Legg Mason's Timm Bechter. "And now, even the small players they have acquired are having a hard time getting traction."
"I think it indicates that the larger buyers would rather deal with bigger, healthier equipment vendors," says Bechter, who has a hold rating on Ciena.
That would explain why Ciena's once-promising toehold at some big phone companies is now slipping.
According to one source, Ciena has cut its entire
sales team and most, if not all, of its
sales staff. Those are two of the industry's largest buyers -- and two places where Ciena has had difficulty turning equipment trials into repeat orders.
"I think these recent cuts are the sorts of reductions they should have been doing last year," says one industry strategist who asked not to be named. "But instead, it seems like they just kept hoping that the market comes back."
While Ciena's troubles are largely a function of its upstart status in a highly competitive industry, its larger peers haven't exactly sailed through the postboom recovery period without hitting a few rocks.
hit with a $25 million penalty Monday by the
Securities and Exchange Commission
for hindering a three-year investigation into sales misdeeds. Nine current and former sales staffers were also charged with crooked sales practices.
And a widening accounting scandal at telecom-equipment giant
helped get its CEO and several top financial officers fired for cause.
Ciena shares were up 17 cents, or 4%, to $3.84. The company is due to report its second-quarter earnings Thursday morning, before the market opens.