Ciena hit its numbers easily enough this morning, but the market doesn’t seem to like its guidance for the company’s fiscal Q4. They’ve had a series of strong reports, I suppose it was inevitable that the bar would be raised too high. Here is a quick summary in some context:
| $ in millions | FQ3/13 | FQ4/13 | FQ1/14 | FQ2/14 | FQ3/14 | FQ4/14 (guidance) |
|---|---|---|---|---|---|---|
| -Converged Packet-Optical | 302.0 | 350.9 | 333.4 | 356.8 | 382.0 | |
| -Packet Networking | 61.6 | 61.2 | 51.7 | 66.5 | 69.5 | |
| -Optical Transport | 66.2 | 52.6 | 40.1 | 29.6 | 31.0 | |
| -Software and Services | 108.6 | 118.7 | 108.5 | 107.1 | 121.1 | |
| Revenue | 538.4 | 583.4 | 533.7 | 560.0 | 603.6 | 570-610 |
| Adj. OPEX | 190.4 | 210.5 | 199.8 | 206.3 | 206.3 | ~210 |
| Adj. GM% | 43.6% | 40.8 | 43.4% | 41.3% | 44.3% | high 30%s to low 40%s |
| Adj. EPS | 0.23 | 0.16 | 0.13 | 0.17 | 0.32 |
Revenues of $603.6M were within the guided range and a touch higher than analyst estimates, while adjusted earnings per share of $0.32 were a few pennies above projections as well.
But the street was looking for a big fiscal Q4 with revenues in the $629M range, a number Ciena’s guidance of $570-610M fell rather short of. According to the PR, fiscal Q4 will be “impacted by several significant variables that contribute to a broader range of potential outcomes for both revenue and gross margin than typically expected.” That’s not very specific so I suppose we’ll have to wait for the call to get a bit more color.
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The factors: incentives for an expanded AT&T relationship, international deployments in early, low margin stages, and new projects whose timing for revenues is unclear.
Looks like Ciena’s explanations have passed muster, the premarket has mostly turned around. The expanded AT&T domain 2.0 partnership surely can’t be a bad thing.