Ciena results, 4Q forecast a downer for telecom sector

Ciena's (Nasdaq: CIEN) higher-than-expected fiscal third quarter loss and, more importantly, lower fourth quarter revenue forecast threw a wet blanket over the entire telecommunications vendor space.

Ciena posted a $29.8 million net loss (30 cents per share) in the third quarter—still lower than the $31.5 million (33 cents per share) in the second quarter—on revenue of $474.1 million and predicted fourth quarter revenue between $455 million and $480 million, well below analyst expectations of $499.7 million. The third quarter adjusted loss was 4 cents per share vesus analyst estimates of 2 cents.

The news caused ripples throughout the telecom equipment space as companies as big as Alcatel-Lucent (NYSE: ALU) (down 2 percent) and Ericsson (Nasdaq: ERIC) (down 3.5 percent) hits and smaller companies like Finisar (down 8.7 percent) and JDS Uniphase (down 5 percent) felt the effect. Ciena's stock, of course, led the way, dropping $3.55 (19 percent) in late trading Thursday to $13.17.

The bleak forecast was based on a U.S. economy that refuses to recover and weakness in Europe, the company said.

"We are experiencing the effects of ongoing macroeconomic challenges and slower than expected roll-outs of new design wins," Gary Smith, CEO of the optical components equipment vendor said in a report by Reuters.

North American customers, he said, were exercising more caution but that market, led by carriers like AT&T (NYSE: T) and Verizon (NYSE: VZ), but that market segment was at least holding steady. Europe was in trouble and got even worse during the third quarter, leading, partially, to predictions that things would stay bad in the fourth quarter.

"The tone of the global economy has clearly grown increasingly more cautious over the past couple of months," Smith said.

For more:
- see the earnings release
- CBS News has this story
- Reuters has this story

Special Report: Wireline in the second quarter of 2012

Related articles:
Optical transport equipment market declines 5%
Vodafone New Zealand selects Ciena to upgrade data network to 100G

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