Ciena Corporation (CIEN): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
Ciena reported a mixed second-quarter fiscal 2014 with earnings beating the Zacks Consensus Estimate and revenues missing the same. The company provided a positive third-quarter revenue guidance as order growth is expected to grow at a healthy rate. We believe that increasing spending on optical upgrades and higher number of orders from international customers will boost top-line growth for the rest of 2014. Moreover, the company's Tier 1 contract wins strong backlog and improving operating leverage are expected to boost near-term results. Additionally, the partnerships with Ericsson and Equinix are also major positives. However, higher operating expense and stiff competition are the primary headwinds going forward. Further, overdependence on few customers for majority of revenue coupled with the macroeconomic crisis in Europe may pose concern for the company going forward. Thus, we downgrade to Neutral from Outperform and set a price target of $20.00.

Overview:

Founded in 1992 and based in Linthicum, MD., Ciena Corp. (CIEN) is a provider of optical networking equipment, software and services. Effective Dec 23, 2013, the company shifted its listing from Nasdaq to the New York Stock Exchange.

Ciena's Packet-Optical Transport, Packet-Optical Switching and Carrier Ethernet Solutions enable network operators to offer efficient transmission of communication services to businesses and consumers. The company's technology aims at addressing key issues such as scalability, increased services, capital expenditure minimization and rising operating costs faced by service providers.

Ciena earned revenues of $2.1 billion in fiscal 2013. Beginning first quarter of fiscal 2013, the company reorganized its reporting segments into (1) Converged Packet-Optical (2) Packet Networking (3) Optical Transport and (4) Software and Services.


The Converged Packet-Optical (57.0% of 2013 revenues) segment includes networking solutions optimized for the convergence of coherent optical transport, Optical Transport Network (OTN) switching and packet switching. Its principal products include the 6500 packet-optical platform, CoreDirector multiservice optical switches, 5430 reconfigurable switching system and OTN configuration for the 5410 reconfigurable switching system.

The Packet Networking (10.7% of 2013 revenues) segment includes the 3000 family of service delivery switches and service aggregation switches, the 5000 series of service aggregation switches and Carrier Ethernet packet configuration for the 5410 service aggregation switch.

The Optical Transport (11.2% of 2013 revenues) segment includes optical transport solutions that add capacity to core, regional and metro networks and enable cost-effective and efficient transport of voice, video and data traffic at high transmission speeds. Its principal products include the 4200 advanced services platform, Corestream agility optical transport system, 5100/5200 advanced services platform, Common Photonic Layer (CPL) and 6100 multiservice optical platform.

The Software and Services (21.1% of 2013 revenues) segment includes unified service and network management software facilitating planned network maintenance, outage detection and identification of customers or services affected by network troubles. The segment includes sales of ON-Center Network & Service Management Suite, integrated network and service management software and the Preside and OMEA software platforms acquired from the MEN Business. The segment also includes services related offerings such as installation and deployment, maintenance support, consulting, network design and training activities.

The company's largest customer AT&T accounted for 17.9% of fiscal 2013 revenues. Revenues from customers in the United States comprised 58.5% of 2013 revenues, while International revenues accounted for the remaining 41.5%. The company operates in the United States and Canada, Caribbean and Latin America, Europe, Middle East and Africa (EMEA) and Asia Pacific.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: CIEN , CPL

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As of 12/19/2014, 04:15 PM


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