Ciena's FY Q3 packet optical revenues rise to $382M, but Q4 forecast causes concern

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Ciena reported that packet optical was again the star performer in its portfolio, with revenues rising year-over-year to $382 million, up from $302 million in the same period a year ago.

The vendor also saw gains in its packet networking and software and services segments, which were $69.5 million and $121 million, up from $61.6 million and $109 million, respectively, in the fiscal-year third-quarter 2013.

However, its legacy optical transport revenues declined to $31 million from $66.2 million year-over-year. But the legacy transport segment represents Ciena's historic/traditional optical (non-converged) platforms, and not the 6500 (Ciena's 100G platform), which can be configured as pure transport if desired.

The decline in the legacy transport section is seen by most industry watchers as a signal of more customers upgrading from legacy to solutions like packet optical, since overall income has risen even with the decline in that segment.

Such trends are being recognized by industry analysts who continue to see healthy growth in the WDM segment, particularly with long-haul 100G networking. A recent Dell'Oro report revealed that the WDM market is enjoying a continual growth wave, rising 10 percent year-over-year in the second quarter of 2014 to $2.6 billion as more service providers deploy 100G in long-haul network applications.

From an overall financial standpoint, Ciena reported revenue of $604 million, up from $538.4 million for the fiscal third quarter of 2013. Net income was $16.2 million, or $0.15 per diluted common share, which compares to a GAAP net loss of $1.2 million, or negative $0.01 per diluted common share, for the fiscal third quarter 2013.

Looking toward its fiscal fourth quarter, the vendor has forecast revenues to come in the range between $570 million to $610 million. The vendor said it expects fiscal-year fourth-quarter 2014 revenues to be "impacted by several significant variables that contribute to a broader range of potential outcomes for both revenue and gross margin than typically expected."

Nomura equity analyst Stuart Jeffrey wrote in a research note that its forecast could put pressure on Ciena's stock.

"Nomura expects the stock to be pressured on the back of Ciena's weaker-than-expected Q4 outlook," Jeffrey wrote. "FQ3 results were better than expected, but Ciena is calling for FQ4 revenues of $570-610mn vs. consensus of $629mn and gross margin of high-30s/low-40% vs. consensus of 43.1%"

Ciena's shares were trading at $18.80, down $1.66 or 8.11 percent, in Thursday morning trading on the Nasdaq stock exchange.

For more:
- see the release

Special report: Wireline telecom earnings in the second quarter of 2014

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