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Updated from 10:05 a.m.

Losses schmlosses.

Ciena

(CIEN) - Get Ciena Corporation Report

will brave a surge of red ink using a hefty cash supply and its leading technology, leaving it to investors to decide whether or not they're on board.

The optical networking shop is selling a mere third of the gear it needs to sell to turn a profit, but with nearly $2 billion in the bank, executives aren't panicked.

"While others are slashing and burning, there's an opportunity for us to hold the course," said Ciena Chief Executive Gary Smith in a postearnings call interview Thursday. "We are one of the few players that can sell our way back to profitability."

Ciena's bold stance differs greatly from some of the larger equipment-making rivals like

Lucent

(LU)

and

Nortel

(NT)

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, which continue to slash workers and products in an urgent attempt to return to profitability. The three-year slump in telecom gear sales and heavy debts has forced suppliers to cut their operations to the bone. Nortel and Lucent are nearing sizes roughly one third that of their peak levels during the Net boom era.

Not so with Ciena. With fewer employees, fewer products and little debt, Ciena vowed last year to capitalize on its relative strengths during the telecom recession and continued to invest in new areas. Last year, for example, the company bought metro optical equipment maker ONI to add local network products to its portfolio.

"Clearly they have enough cash to last them until they return to break-even. The last time I did the math, I figured they have about four years' worth of cash at this rate," said Lehman Brothers analyst Steve Levy, who has a sell rating on the stock. Lehman has no underwriting ties to Ciena.

"The issue is not whether they can spend their way out of this," said Levy, "it's an issue of how long it takes them to get there."

Ciena needs to grow by at least 10% a quarter for the next 10 quarters to reach its current break-even level, according to Levy.

Ciena helped its case a little Thursday, delivering better-than-promised sales growth in the first quarter. The Linthicum, Md., gearmaker said that it expects to do as well or slightly better in the second quarter.

But despite a strong top-line performance, Ciena had a whopping $170 million in net losses, or about 25 cents per share on sales of $70.5 million. While the revenue jumped 14% sequentially, it was well below half the $162 million level a year ago.

On a normalized basis, Ciena had a net loss of 11 cents, which was 2 cents narrower than analysts' expectations, according to a Multex tally.

Ciena says it still expects to show year-over-year sales growth, but will come up far short of its quarterly revenue break-even level of about $200 million. And though that is some three times greater than the current revenue level, the company showed no signs of starting another round of cost cutting.

Investors cheered Ciena's sales performance, sending the stock up more than 3% to $5.68 in midday trading Thursday.

Analysts say Ciena needs to sell more gear to large phone companies in order for its strategy to succeed. This presents a bit of a Catch-22 for Ciena, since it needs to have a sizable sales and support staff to bag the big customers.

For observers like Levy, there's lots of short-term risk involved with going that route.

"The company is patient and they have good products," said Levy. "Our advice to investors is come back in a year."