Ciena expects Verizon 100G metro optical revenues to ramp in 2017

A top Ciena executive says that it will see revenues with Verizon's (NYSE: VZ) ongoing 100G metro network rollout to start ramping up between 2017 and 2018 as the telco equips more metro areas with Ciena gear.

Gary Smith, CEO of Ciena, told investors that the rollout is moving along as Verizon sets its plan to address a "mix of larger and smaller metros" with 100G capabilities.

"We've taken some revenues, but I would say it's pretty small," Smith said during the earnings call, according to a Seeking Alpha earnings transcript. "We'll take some more during the second half as that begins to ramp. But I think you're probably looking at 2017 and 2018 for the majority of revenues associated with it. But it's pretty much on track and as they'd previously indicated."

In 2015, Verizon named Ciena and Cisco as the two prime vendors for its 100G metro network rollout in the United States. The Ciena and Cisco platforms are going to serve as a Greenfield overlay to its existing metro transport network that uses Coriant and Fujitsu ROADM systems.

At that time, Verizon said that by using Ciena and Cisco's 100G CDC ROADMs it will be able to "advance and scale its network while maintaining existing services and reducing service-activation times as well as network operation and maintenance costs."

Sales to Verizon and other large Tier 1 telcos clearly had an effect on Ciena's Packet Networking and Converged Packet Optical segments.

Packet networking continued to be a star performer in the second quarter for Ciena with revenues rising 30 percent year-over-year and over 40 percent sequentially to $68.5 million.

During the quarter, Ciena had 15 new packet networking wins, including a number of Tier 1s, both in North America and internationally.

"Packet business from Tier 1 service providers, government agencies, utilities, and regional carriers from across North America, EMEA and APAC, and we're seeing international diversification beyond packets as well, really reflecting the investments we've made to support applications like submarine and investments in key markets, such as Brazil and India," Smith said. "And we had a particularly strong quarter in CALA and APAC, with both regions experiencing better than 20 percent year-over-year revenue growth in Q2."

Not far behind packet networking was Converged Packet Optical, where revenues were $435.2 million, up year-over-year from $389 million in the same period a year ago. However, Optical Transport declined year-over-year to $8.5 million.

However, net profit slipped to $14 million or 10 cents per diluted share, from $20.7 million or 17 cents per diluted share. From an overall financial point of view, Ciena reported second fiscal quarter revenues of $640.7 million, up year-over-year from $621.6 million in the same quarter a year ago.

Looking toward the third quarter, Ciena has forecast $655-685 million and an adjusted gross margin in the mid-40s percentage range.

For more:
- see the earnings release
- see the Seeking Alpha earnings transcript (sub. req.)

Special report: Verizon and Frontier begin new transitions: Tracking wireline telecom earnings in Q1 2016

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