Telecom Ramblings

Telecom equipment provider Ciena (NASDAQ:CIEN - chart, news, filings) reported earnings this morning, giving us our latest glimpse into what will hopefully be a sustained economic recovery in the sector.  Revenues of $176.3M were up 7% from 164.8M in the prior quarter and were well above expectations.  Guidance had been for flat revenue growth, and analysts weren’t looking for much more than that.  Sales in the equipment sector tend to be very volatile, and when the recession hit they fell like a rock.  Now with a second straight quarter of growth, we are starting to see them begin to shoot up and the company has guided for up to another 5% sequentially in the first quarter.  But it’s still a long way back up that cliff still before Ciena recovers to where they were a year and a half ago.

However, the report wasn’t all roses.  Non-GAAP loss per share was $0.12, worse than expectations by $0.05.  What happened?  Gross margin of 44% was down only slightly, the larger effect seems to be a bit of a surge in R&D and SG&A.  Those two tend to be rather lumpy though, and were lower than expected in the prior quarter.  One might also suggest that they spent more gearing up for greater demand.  Perhaps they saw some extra costs related to the Nortel bidding activity as well.  I don’t really see much to worry about yet, the important thing for Ciena is to restore its revenue to the levels at which it can turn a profit and they made good progress on that this quarter.

Obviously, however, Ciena’s fortunes depend less on these numbers and more on the success of their integration of the Nortel MEN assets.  Enjoy your Christmas vactions guys, you’re going to be a tad busy next year.