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Investors awaiting the next twist in 2003's great tech disconnect should tune in for tomorrow's briefing with

Ciena

(CIEN) - Get Ciena Corporation Report

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The Linthicum, Md., networking shop has been a prime beneficiary of Wall Street's renewed thirst for the high-risk growth plays of yesteryear. Ciena shares have surged 59% off their spring low, driven in large measure by the assumption that a reviving economy will at long last free corporate America to resume spending on communications gear. The company is due to post fiscal fourth-quarter results Thursday morning.

But some tech watchers warn that Ciena's performance has yet to live up to its surging stock, and they see little sign that it will. Demand remains soft for the optical gear at the heart of Ciena's product line. And observers doubt that even an improving economy will boost sales of other products enough to drown out the sputtering sound at the company's core.

"They've lost a lot of business, and they don't have whole lot going for them right now," says Telecom Pragmatics analyst Sam Greenholtz. "Like the others in this business, Ciena is redefining itself as more of a converged data equipment company."

On Tuesday, Ciena slipped 15 cents, to $6.61.

Reloading

Longtime fans will recall that Ciena once was the purest of the pure-play optical shops. That designation soothed investors by assuring them that network operators would always need the company's products, in thick times or thin. The thinking was that as networks inevitably convert from electronics to optics, Ciena's gear would sell, because it not only boosts capacity but also allows phone companies to squeeze more sales out of a line.

Downtrend
Ciena's long slide

As it turns out, however, big telcos have come to shun Ciena's gear along with everyone else's, which explains why sales have plunged and the stock trades at just a fraction of its 2000 all-time high. Those setbacks also explain why the company has spent the last year retooling by shedding workers and product lines, and expanding other capabilities.

Now the company finds itself largely in the same boat as its larger rivals

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, focusing on technologies that could return the company to growth once demand returns.

For that reason, analysts will be listening Thursday for updates on the challenges confronting Ciena's transformation from all-optical specialist to all-around data gearmaker.

On the Run

But the early reports haven't been altogether encouraging. At two recent investment conferences, Ciena strategy chief Steve Chaddick has been noticeably dour when describing the outlook for optical sales, saying there's very little sign of recovery ahead. And while there's plenty of opportunity in selling other hardware, such as so-called aggregation devices that help telcos merge different types of traffic onto one pathway, it's not clear that Ciena's gear has an edge over all the others.

Lehman Brothers analyst Steve Levy is among those warning that Ciena's stock appreciation may be outrunning actual performance. Given the somber tones of the recent executive commentary, Thursday's earnings report may not hold many upside surprises, he warns.

"We do not see Ciena posting October quarter sales well ahead of guidance, so these expectations do not leave much room for incremental improvement or other positive surprises," Levy said in a research note Monday.

In August, executives said fourth-quarter sales could be as much as 5% higher sequentially, or about $72 million. But Wall Street is expecting more like $70 million. On the earnings side, analysts polled by Reuters Research, formerly Multex, expect a net loss of 9 cents per share -- flat with the third quarter and a 6-cent improvement from the year-ago period.

One potential bright spot could come on the optical gear side. There, executives may have some news to share about a defense department network construction project called GIG BE. Ciena is

expected to get a piece of the lucrative supply contract.