After Finisar buoyed Wall Street’s opinion of the optical communications space when it announced both record revenues for its recently completed quarter and expectations for continued success to finish the calendar year (see “Finisar expects revenue pace to continue”), Ciena Corp. (NASDAQ: CIEN) appears to have changed the space’s reputation again. The optical transport and switching system vendor missed earning expectations for its fiscal fourth quarter ended October 31, 2013. Its stock price is taking a beating as a result.
Ciena did just fine as far as revenues are concerned. The company reported $583.4 million, above its guidance of $515 million to $545 million as well as the $465.5 million it earned in the year-ago quarter. However, it reported adjusted earnings per share (EPS) of $0.16 per share against expectations of $0.24. GAAP gross margin also slipped sequentially from 42.4% in the previous quarter to 39.7% in 4Q13, despite revenues for the recently concluded quarter being $45 million higher.
James E. Moylan, chief financial officer and senior vice president of finance at Ciena, told analysts on a conference call the higher than anticipated adjusted operating expense of $210 million resulted from several factors. These included strong order flow, which led to increased performance-based variable compensation, as well as the arrival of R&D expense that was deferred from previous quarters.
Investors didn’t take the earnings miss lightly. At around noon today, Ciena’s stock was trading at $21.26, down $1.64. Other stocks were suffering as well during what has been an overall down day in the markets so far. Infinera was down $0.04, ADTRAN was off $0.13, and Cisco was $0.43 lower. Alcatel-Lucent, conversely, was up $0.01.
Other numbers for 4Q13 were more positive. GAAP net loss was $9.8 million ($0.09 per common share), much better than the year-ago quarter’s GAAP net loss of $38.8 million ($0.39 per common share).
For the fiscal year, Ciena reported revenue of $2.1 billion, better than the $1.8 billion earned in fiscal year 2012. The company saw a GAAP net loss of $85.4 million ($0.83 per common share) for fiscal 2013, which again compared favorably to fiscal 2012, which saw a GAAP net loss of $144.0 million ($1.45 per common share).
“Fiscal 2013 was a strong year for Ciena, with industry-leading revenue growth, record backlog, increased market share, and a three-fold improvement in adjusted operating profit over last year,” said Gary Smith, president and CEO of Ciena, via a press release. “This performance validates the strategic market differentiation we’ve established with our OPn architecture, our unique approach to customer engagement, and our continued technology innovation. These differentiators will help us continue to grow revenue and increase operating leverage in 2014.”
Looking forward to the 1Q14, which runs through this coming January, Ciena says it expects the usual seasonal reductions in order volume and customer deployment activity. This led management to forecast revenues in the range of $515 to $545 million, non-GAAP gross margin percentage in the low 40s, and non-GAAP operating expense of approximately $205 million.
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