Seeking Alpha: Ciena Goes Back Into The Penalty Box

When I cooled on Ciena (NYSE:CIEN) six months ago, my concerns were largely about valuation and the risk that market expectations were getting a little hot for a company that still had some real challenges in boosting margins (not to mention competing with the likes of Huawei, Alcatel Lucent (NYSE:ALU), and Infinera (NASDAQ:INFN)). I didn't expect a 23% fall, though, and the reaction to Ciena's disappointing fourth quarter guidance seems a bit much.

To buy Ciena today I think you need to have confidence that the upgrade cycle is going to last at least five years, that non-traditional customers (like Web 2.0 companies) will continue to represent a growth opportunity, that Cisco's (NASDAQ:CSCO) efforts to move down the stack will only go so far, and that Ciena can leverage the Ericsson (NASDAQ:ERIC) partnership to improve its OUS share and its overall margins. That's a lot to digest, and I don't want to suggest that you have to accept all of that to be more bullish than the Street, but if Ciena can reach (and keep) a double-digit FCF margin and generate long-term revenue growth in the mid-single digits, these shares are getting interesting again.

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Ciena Goes Back Into The Penalty Box

Seeking Alpha: After A Solid Rebound, Ciena Isn't Quite As Appealing

Back in mid-December, I thought Ciena (CIEN) looked like a good buy-the-dip opportunity. Even with the post-earnings pullback on Thursday, the shares are still up about 15% since that piece, nearly tripling the return the S&P 500. I am bullish about the company's partnership with Ericsson (ERIC) and its prospects for growing its global 100G share. At the same time, though, that is going to be a long-term process and I don't see as much undervaluation in the shares as I did three months ago.

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After A Solid Rebound, Ciena Isn't Quite As Appealing

Seeking Alpha: Ciena Isn't Done Yet

Optical telecom equipment maker Ciena (CIEN) has pulled back, and it's time to consider buying the dip.

"Wait for a pullback" and "buy on a dip" are some of the most hackneyed pieces of investment advice out there, and there's often an important detail missing. While it often does make a great deal of sense to buy good stocks on a momentary setback, what investors are seldom reminded of is that buying on these occasions often requires a lot of fortitude. After all, there's usually some near-term reason why the shares are trading down and climbing aboard a stock just as it is careering off a cliff is an experience that sticks with you.

Ciena has certainly seen the pace of sales growth and margin improvements slacken, but I believe this will prove to be a pause that refreshes. There still seem to be long-term legs to the equipment/network upgrade cycle, and Ciena has reemerged as a share gainer in the space. Investors can't ignore the risk that 2014 sees sales growth slow after the double-digit growth in fiscal 2013, but the valuation here is appealing.

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Ciena Isn't Done Yet

Seeking Alpha: Cyan Looks To Bring The Green

Talking about increasing carrier network traffic may border on the cliché at this point, but it's a real problem for network operators. If Cisco's (CSCO) prior estimates of compound annual traffic growth of 23% between 2012 and 2017 are even close to accurate, carriers badly need new strategies for coping with traffic growth, as boosting capex by 23% a year for five years isn't much of an option.

This is where Cyan (CYNI) comes into the picture. Cyan is unproven (less than $100 million in revenue), but the company has two separate approaches to help carriers meet their network needs - packet-optical transport systems that can help manage traffic at the metro edge and reduce the need for expensive routers, and a purpose-built SDN solution for carriers that offers the promise of more efficient network utilization.

Cyan is going up against numerous well-established equipment vendors and alternative approaches to managing network traffic. What's more, I have some concerns that the company's position in carrier SDN isn't as unique as hoped. Even so, I believe there is an argument to be made that Cyan shares are trading meaningfully below fair value. While this is a company/stock with above-average risks, a fair value in the range of $12.00 seems reasonable and that range could expand well into the high teens.

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Cyan Looks To Bring The Green

Investopedia: BlackBerry Finally Looking For A Bidder, But Will A Real Buyer Bite?

It looks like an outbreak of rationality has hit BlackBerry (Nasdaq:BBRY), as the company announced on Monday that it had formed a special committee to “explore strategic alternatives” for the struggling handset company. While the company's announcement mentioned options like joint ventures, partnerships, and alliances, shareholders, analysts, and investors are are zeroing in almost exclusively on the possibility of a sale.

If BlackBerry is serious about a sale, it'll happen. I have no doubt that, at the right price, the company can find a buyer willing to take on the not-inconsiderable task of turning around this struggling high-end handset company. The trick is going to be that “at the right price” part. BlackBerry's enterprise value (that is, market capitalization net of cash and debt on the balance sheet) isn't very large, but any buyer is looking at a likely multi-year restructuring/turnaround program that will require capital, compress margins, and offer only uncertain payoffs.

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Investopedia: Nokia Buys Out Siemens, Are Phones Now On The Block?

There was never really a question as to if Nokia (NYSE:NOK) and Siemens (NYSE:SI) would unwind their 50/50 partnership in Nokia Siemens Networks. Siemens had made it quite clear that they were considering all options for monetizing their stake and continuing their own plan to streamline operations. What's more, it was becoming increasingly clear that there was minimal third-party interest and that going the IPO route wasn't likely to realize full value. Curiously, though, Siemens has chosen to sell its stake in the venture to Nokia at a pretty undemanding valuation.

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Investopedia: Could Alcatel-Lucent's Restructuring Boost Ericsson Further?

At the risk of sounding like I'm looking to bash Alcatel-Lucent (NYSE:ALU), I have been thinking more about the company's recently-announced restructuring efforts and wondering if they will help the company as much as they may help the company's rivals. The “law of unintended consequences” is real, and though there are sound motives for the company's moves, it nevertheless could backfire. To that end, I have to wonder if Ericsson (Nasdaq:ERIC) and Huawei are poised to reap the most benefit from Alcatel's self-improvement plans.

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Investopedia: Will A New Alcatel-Lucent Plan Lead To Better Results?

Stop me if you've heard this before – Alcatel-Lucent (NYSE: ALU) has a bold plan to cut costs, refocus the business, and return the company to profits and prosperity. To be fair, the new CEO does deserve a chance to show if his plan can/will work, and the broad strokes outlined today make sense. Even so, this is Alcatel-Lucent and the telecom equipment industry we're talking about, and success is far from guaranteed.

Cut Costs, Cut Businesses
 The centerpieces to the new plan are deep cost cuts and a sharp focus on businesses where Alcatel-Lucent can compete effectively in the coming years.

While the company had been targeting about EUR 500 million in cost cuts by 2015, that target has been doubled. Management intends to achieve this by increasing its direct channel focus with sales and marketing and reducing the scope of its R&D. That's an interesting move, particularly given how many Alcatel-Lucent bulls try to point to the company's patent estate as a store of future value. While it makes ample sense to reduce the scope of R&D (translating those patents into real products and real revenue streams has not gone well), I wonder how it will go over with shareholders.

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Investopedia: Alcatel-Lucent Looking At Long Road, But Not Starting From Scratch

To get a sense of just how badly wrong the Alcatel-Lucent (NYSE:ALU) story has gone, consider that the combined company has never produced a full year of positive free cash flow since the 2006 merger. What's more, while the company still has very relevant share in areas like edge routing, rivals like Ciena (Nasdaq:CIEN), Huawei, and ZTE have been taking share, while companies like Nokia Siemens Networks get their acts together.

That's all pretty well known, though, and part of the reason the stock sits below $1.50 today. With a new CEO, new products, and new market opportunities, perhaps Alcatel-Lucent has new life to offer shareholders.

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Investopedia: Nokia Still Straddling Fault Lines

Roughly 18 months into his tenure as the CEO of Nokia (NYSE:NOK), Stephen Elop hasn't yet proven much of anything about the future of this former mobile device leader. The company has done a better-than-expected job of cutting costs and its Nokia Siemens Networks joint venture is looking a lot better, but the company continues to lose mobile device share at an alarming rate. While the company's ongoing existence as a going concern is arguably not an issue, there's a great deal more to do before the company can be considered a real turnaround stock.

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Investopedia: ADTRAN Looks To Rebound From A Pretty Miserable 2012

It's almost cliché to talk about how bad of a year 2012 was for communications equipment vendors dependent on American and European carrier spending. With core broadband access product sales down 13% in 2012, ADTRAN (Nasdaq:ADTN) definitely found itself among the laggards, with shares down more than 30% over the past year and well below the S&P 500.

But 2013 is a new year, and hope springs eternal in the hearts of tech investors. While investors should not discount the competitive risks from rivals like Calix (NYSE:CALX) and Alcatel Lucent (NYSE:ALU), there is reason for at least cautious optimism that carrier infrastructure deployments will lead to better results for ADTRAN. At a minimum, it certainly doesn't seem like the Street has priced this stock for particularly breathtaking performance.

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Investopedia: Oracle Dials It Up In Telecom

Oracle (Nasdaq:ORCL) doesn't do things halfway, and when the company announced its acquisition of Acme Packet (Nasdaq:APKT) it looked like only the beginning of the company's strategy to exploit the large telecom vertical. Now we know that the company really is serious, as it has followed the Acme Packet deal with an announcement that it intends to acquire networking vendor Tekelec from its private equity owners.

A Complimentary Deal With Interesting IP Ramifications
Right off the bat, acquiring Tekelec makes quite a bit of sense. Tekelec is a telecom equipment vendor that specializes in products that handle mobile traffic. In particular, the company focuses on areas like network signaling, policy control, and subscriber data management. Combined with Acme Packet's network control products/technology, Oracle will offer a cohesive hardware/software line-up in network control for large carrier customers like Verizon (NYSE:VZ) and AT&T (NYSE:T).

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Seeking Alpha: BroadSoft Broadsides Investors

Growth stocks have a relationship with Wall Street not unlike that between mobsters and their "clients" - namely, "give us the growth … or else." Unfortunately for BroadSoft (BSFT) investors, the company had little choice but to go with "or else" with its guidance for 2013. As revenue growth appears to be flattening, the biggest question now is whether it's a pause or the warning sign that the BroadSoft growth story isn't what investors thought it was. While I'm inclined to believe that this is a pause and not a stop, investors need to appreciate the above-average risk and volatility in this name.

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BroadSoft Broadsides Investors

Investopedia: Is Telecom The Next Squabbling GRound For The U.S. And China?

It's unfortunate, but the reality of politics in America these days is that it's sometimes hard to tell the difference between political posturing for the benefit of the constituents who watch TV and legitimate issues of national importance. Take the recent report from the U.S. House Intelligence Committee that recommends U.S. companies and government agencies avoid doing business with Chinese firms Huawei and ZTE - is this a legitimate concern for U.S. security, or just an unnecessary pre-election kerfuffle?

Perhaps even more critical to investors, however, is the question of whether Congress intends to put any real force behind this recommendation, and whether there will be consequences for American hardware vendors such as Cisco (Nasdaq:CSCO) and Juniper (Nasdaq:JNPR).

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Seeking Alpha: Alcatel-Lucent - The Rope Is Getting Tighter

When I last wrote on Alcatel-Lucent (ALU) a quarter ago, longs certainly didn't appreciate my skepticism on this company's near-term prospects. Nevertheless, the stock has dropped almost another 40% since then, and now questions are popping up regarding whether the company can cut enough costs to remain a viable contender.

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Alcatel-Lucent - The Rope Is Getting Tighter

Seeking Alpha: Alcatel-Lucent: Still Building On Loose Sand

Waiting for a true, sustained recovery in carrier spending is starting to feel like waiting for Godot. Although there have been a few bright spots this quarter, Juniper (JNPR) and Ericsson (ERIC), even those are "yeah, but..." stories. With Alcatel-Lucent (ALU) it's even worse, as the company is falling short not only in sales, but may also be losing hard-won margin leverage.

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Alcatel-Lucent: Still Building On Loose Sand

Investopedia: Aruba Still A Growth Story In A Growth Market

 Even if consumer demand for smartphones and tablets has started to disappoint lately, there is little question that it is still a major emergent trend in enterprise IT. As Aruba Networks (Nasdaq:ARUN) is built upon facilitating wireless access to network resources, it is a good pure play on this secular growth. While worries about enterprise IT spending and reinvigorated competition are relevant in the context of a robust valuation, this is still an interesting tech growth story.



A Solid Start to the Fiscal Year
Aruba is getting its fiscal year off to a solid start. Revenue rose 44% in the quarter and 5% on a sequential basis. Profitability is also fairly good. Gross margin did worsen from last year ((whether generally accepted accounting principles (GAAP) or non-GAAP)), but improved decently on a sequential basis. Operating income was more uniformly positive - the year-on-year GAAP increase being so large as to almost be irrelevant, while the company added almost a point and a half to non-GAAP operating margin on a sequential basis. (To know more about income statement, read: Understanding The Income Statement.)


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Investopedia: Cisco Dunks ... On The Kiddie Hoop

For all of the excitement about Cisco's (Nasdaq:CSCO) "strong" first quarter, an important detail seems to be overlooked. Namely, that expectations have been going down steadily on Cisco for some time, and if the company couldn't beat this low hurdle, that would be a sign of some serious problems indeed. Though I've long been a bull on Cisco's under-appreciated inherent value, investors should keep a little perspective here and realize that Cisco is not exactly fully in the clear just yet.

A Mildy Encouraging First Quarter  
After a rough stretch of financial underperformance, Cisco did announce estimate-beating revenue and 5% year-on-year growth. Product sales grew 3% from last year and were roughly flat with last quarter, while service revenue picked up 12 and 1%, respectively. Switching and routing were both reasonably strong on a sequential basis (up almost 2 and 5%, respectively) and make up about two-thirds of the product revenue base.

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Investopedia: China Mobile May Be Right For The Times

There are plenty of reasons not to like China Mobile (NYSE:CHL). Not only is China's largest cell phone operator closer to the Chinese government than many investors will find comfortable, but the company is also likely well past the point of exciting top-line growth. All of that said, though, this is a company with major market share, hand-over-fist cash flow generation, and a very solid business. Given how turbulent the markets are and the spasms that go with even modest disappointment, China Mobile looks like a dividend growth idea where investors can lay low for a while. 

Second Quarter Results - Solid, But Not Scintillating  
China Mobile's results probably won't impress casual observers, but they were better than many analysts had expected. First half revenue rose almost 9%, while second quarter revenue rose a half-point more. Second quarter EBITDA rose more than 7% (and margins compressed about 80 basis points), and net profit was up 7%. (For more on EBITDA, see A Clear Look At EBITDA.)

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Investopedia: Where Have All The Tablet Sales Gone?

When Apple (Nasdaq:AAPL) launched the iPhone in 2007, it ushered in a wave of smartphone development, and customers responded by buying millions of the things from Apple, Motorola Mobility (NYSE:MMI), Research In Motion (Nasdaq:RIMM), Samsung, HTC and other vendors. When Apple introduced the iPad in 2010 there was a similar expectation that tablet computers would quickly sweep up similar retail sales.

Curiously, there has been a rather sizable pothole on the way to tablet prosperity. While Apple has indeed seen good demand for the iPad platform, rivals running on Google's (Nasdaq:GOOG) Android platform have not fared nearly so well. The question is, then, whether the tablet market can still live up to initial expectations or whether it will prove to be a step too far for the mass retail segment. (For related reading, see The 4 R's Of Investing In Retail.)

Few Successes, Ample Disappointments
Apart from Apple and Samsung, few tablet manufacturers have seen demand meet their expectations. RIM shipped just 500,000 units in the first quarter, decided to delay a 4G version until the fall, and supposedly cut internal sales expectations for the PlayBook in the second quarter to one-third of the initial level (800,000 to 900,000 units versus 2.4 million).

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