Shares of the Linthicum, Md., networking shop fell 13% Thursday after the company reported a wider-than-expected loss along with a sales
shortfall for its latest quarter.
The past three years, which have brought a telecom industry downturn and a sputtering recovery, have put Ciena in a tough spot. But even as other telecom gearmakers are seeing a glimmer of order growth, Ciena can't seem to drum up much demand for its somewhat stale optical networking equipment.
The company's troubles were only partly masked by company executives on a conference call with analysts Thursday. Ciena says it will see a 30% jump in third-quarter sales from second-quarter levels. But critics say the growth is largely due to contributions from tech businesses Ciena has recently acquired, a state of affairs that speaks poorly of the company's core business.
Ciena's technological prowess in areas of optical transport and switching once made it a promising upstart in next-generation networking. Ciena's CoreDirector optical switch was nearly unrivaled at one point during the Interent building boom.
As buying trends changed, though, Ciena's strategy shifted toward acquisitions that would help broaden the company's product offerings.
CEO Gary Smith says it would be wrong to assume that all of Ciena's projected growth will come from products it has recently acquired. But he declined to say how much the new gear would contribute to the upswing. In the future, Smith said the new stuff "will contribute more" to total sales than core optical gear.
The company also said on its earnings call that operating costs will be trimmed by 30% at the end of its fiscal year in September.
reported Wednesday, Ciena is in the process of cutting an additional 25% of its staff. That comes on top of last month's announced cut of 425 workers with the closing of the company's ONI facility in San Jose.
Ciena didn't deny the latest round of layoffs, but Smith said the company could get to its new cost-savings target with current initiatives including the 425 job cuts. "I can't say there's not going to be more than 425," says Smith.
The total staff count right now at Ciena is 1,700. That number includes the 425 employees who will be let go with the ONI shutdown, but it doesn't include the 380 employees who will come aboard with the acquisitions of Catena and Internet Photonics. Smith said Ciena's headcount would be lower than 1,700 by year-end, but he declined to give a projection.
Analysts point out that the company's revenue guidance still leaves it well shy of its $140 million to $150 million projected break-even point, indicating costs remain well out of line with sales.
People familiar with the company say a portion of the new cuts are coming from a turnover in the company's sales force. Ciena has named former
sales executive Jim Collier to head up a new sales strategy. Under the new scheme, Ciena sales teams for customers like
have been fired and several new replacements have been named.
Smith says the changes reflect both the poor sales performance and a need to get people whose "skill sets" can help them sell from a bigger list of products.
As one analyst points out, sales of networking equipment are starting to pick-up elsewhere in telecom -- even in optical gear. "The problem is that it's not picking up for Ciena," the analyst notes.