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No Sparkle at Ciena

An investor day sends Wall Street the wrong message.

Ciena (CIEND) sank 8% Tuesday after the company failed to impress at a New York meet-and-greet.

The Linthicum, Md., optical-networking gearmaker told analysts and investors in New York that it would match Wall Street's fiscal 2007 revenue target. Ciena also said its operating margin would be around 10%, in line with expectations.

Ciena had scheduled the event in hopes of winning over a whole new group of fans on the heels of last month's reverse stock split. But shares sank in heavy trading as investors who were hoping for stronger guidance were disappointed.

"People were expecting more," said an investor who spoke on condition he not be named.

Ciena CEO Gary Smith suggested in a sidebar discussion that Ciena expects to match the Wall Street consensus revenue estimate, which calls for 22% year-over-year growth to around $687 million.

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"You could look at that and see some opportunity for upside," Smith said. He added that "we aren't seeing the dropoff in some segments that others are."

Smith said Ciena expects to concentrate its growth in its higher-margin products, such as converged metro and core optical switching gear. Those types of equipment help telcos and other service providers support fast-growing Internet protocol traffic.

Smith added that Ciena expects to grow faster than the telecom equipment market.

But some investors saw a disconnect in Ciena's decision to merely maintain revenue and margin guidance, in light of its mostly bullish comments about growth and product mix.

Shares fell $2.25 to $24.82 Tuesday.