Ciena Reports, Integration Still On Track

September 8th, 2010 by · Leave a Comment

Ciena (NASDAQ:CIEN, news, filings) reported earnings this morning for its fiscal Q3, which ended on July 31.  Revenues of $389.7M were solidly within the guidance of $375-400M and up from $253.5M in the prior quarter, which simply reflects its first full quarter of revenue from its Nortel MEN unit.  This quarter, $221.8M came from that Nortel unit, which means that $167.9M derived from Ciena’s traditional business – up $3.1M from the same quarter last year.  

Adjusted gross margins were 45.2%, a bit above the expected low 40% range they projected.  Adjusted earnings per share came in at a loss of $0.09, which far exceeded analyst expectations of a loss of $0.33.  But honestly, when it comes to EPS, the street rarely comes close with Ciena.  There were $17M in integration expenses and another $2M in restructuring costs during the quarter.  

Guidance for the fiscal fourth quarter (ending Oct 31) is for sequential revenue growth of up to 5%, which would be about $410M, and for adjusted gross margins to again fall in the low 40% range.  That revenue projections is probably below expectations, which will tend to counterbalance the better adjusted EPS number.

Ciena took a great plunge into the unknown with its purchase of Nortel’s MEN unit, and their future still depends on several more quarters of successful integration.  But so far, it is somewhat surprising how predictable things have been.  They say they achieved some integration milestones ahead of schedule during the quarter which is of course a very good thing.  But it’s probably the next quarter or two that are the most critical.  Keep those seat belts on.

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Categories: Financials · Telecom Equipment

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