Through TheFLY's Eyes:Ciena Corporation

from Theflyonthewall.com






Slightly Weak Guidance But Becoming A Real Company

Ciena's (CIEN) stock was off in trading on Friday due to weak gross margin guidance for both the next fiscal quarter and for its operating model. However, even with the weak gross margin guidance, this is another optical company that should be placed back on investors' radar screens.

Ciena quietly reported its 10th consecutive quarter of sequential revenue growth. Sequential revenue growth for the most recent quarter was 16%. Also gone are the pathetically low gross margins for Ciena's business. Ciena reported 47% gross margins in the most recent quarter--that's pretty good.

Why was the stock weak in Friday's trading? Gross margins ticked down from 48% in the previous quarter. In addition, management suggested that sustainable gross margins will be in the mid-40% area. Also, the company said sequentially revenue growth would only be 5% in the current quarter, a slowdown in growth.

However, even with a slow growth quarter expected, it appears that Ciena's broad business is improving. Long-haul service providers are coming back to market to add capacity. Also, Ciena's product innovation initiatives during the industry downturn are paying off as its products remain competitive.

Ciena is a name that should not be forgotten. Its products are strong, it is profitable and has a strong cash position. On October 10th, Ciena will host an analyst day in New York. This will be an opportunity for investors to re-familiarize themselves with this tech-telecom bubble stock.