Ciena's Second Act

Optical networking company Ciena (Nasdaq:CIEN) is, if nothing else, a survivor. Although Ciena is thought of as a classic tech-bubble stock, this one actually did not peak until late in 2000 - well after the peaks for rivals like Cisco (Nasdaq:CSCO), Alcatel-Lucent (NYSE:ALU) and the Nasdaq in general. Like Alcatel though, Ciena fell hard and fast as its customers dramatically over-spent on equipment and many went out of business. What remains to be seen is whether Ciena has the ability to produce a second act of profitability and growth. 

A Typical Tech Quarter ... More or Less  
Ciena's quarter was not all that different from many others in the tech space. Revenue growth on an annual basis looked very strong (up 137%), while sequential growth was more moderate (up 7%). More specific to Ciena, the company's organic business was rather soft, and growth was really driven by the MEN business acquired a little while ago from Nortel.

Profitability was a mixed bag. Although analysts seem relatively pleased with the company's gross margin, the company nevertheless saw this profitability metric drop on both an annual (down 120 basis points) and sequential (down 150 basis points) basis. As for operating income, there wasn't any - the company had an operating loss this quarter, last quarter and in the year-ago quarter.

One point of note is the company's SG&A spending for the quarter. On one hand, this is a company that pays salespeople for orders and the jump in sales/marketing spending could be seen as a sign of more revenue on the way. On the other hand, "general and administrative" expenses basically tripled from the year-ago level, so it may be that the company is just spending more overall. (For more, see Fundamental Analysis: The Income Statement.)

Please follow the link for the full piece:
http://stocks.investopedia.com/stock-analysis/2010/Cienas-Second-Act-CIEN-CSCO-ALU-TLAB-INFN-T-CLWR1214.aspx