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Ciena's Forecast Fizzles

Investors look past a blowout quarter and instead focus on tepid guidance.



tame guidance doesn't please growth fans.

Shares of Ciena were sliding 9% Thursday after the optical networking specialist

reported better-than-expected fiscal fourth-quarter results but set 2008 targets below Wall Street's estimates.

The selloff holds to a long-standing tradition among Ciena investors, who cheer another quarter's expectation-beating performance and then register their disappointment with the company's outlook.

For example, Ciena closed the books on fiscal 2007 with an annual growth rate of 38%, well above the high 20% range the company predicted.

CEO Gary Smith says he understands why investors and analysts question his forecasting accuracy.

"We try to give them the best view we can from that snapshot in time," Smith says about his guidance strategy.

On the earnings conference call Thursday, analysts pushed for a rationale for why Ciena's outlook is dimmer than past performance.

"They are looking for the magic formula, some metric that gives visibility to that

guidance, Smith said.

Smith says his view of the business over the first half of next year is good. If he had to characterize the mood of his customers, he says, they "are cautiously optimistic."

Overall, Ciena's momentum continues, says Smith. Network operators are handling ever-increasing amounts of traffic and their capacity needs are growing.

This underlying demand for new gear chugs along, says Smith. "There are bumps along the way, like concerns about the economy, but this is a train that's difficult to stop."

And more importantly, if it derails, don't blame Ciena for setting expectations too high.