Ciena cutting workforce by 17%

23 September 2002 -- Ciena Corp is cutting 450 staff (17% of its workforce) as it reduces its target for quarterly break-even revenue from USD300m to USD200m.

23 September 2002 -- As part of its ongoing restructuring efforts, equipment maker Ciena Corp is cutting 450 staff (17% of its workforce), leaving about 2200.

For its fiscal Q3 (to end-July) Ciena made a loss of USD160m. Sales were USD50m compared to an expected USD68m (down from USD87m in Q2 and down 88% on USD458m a year ago).

In May market researcher IDC said that Ciena's share of the worldwide DWDM long-haul market rose from USD840m (10%) in 2000 to USD1.3bn in 2001, capturing the lead from Nortel Networks Corp, which fell from about USD3.4bn (41% share) in 2000 to about USD1.21bn (22%) in 2001, a bit less than Ciena. However, the total long-haul DWDM market shrank 34% below its 2000 level of USD8.4bn, as North American revenues fell from about 70% of the total in 2000 to about 57% in 2001.

Nevertheless, Ciena added 19 new customers, including 14 due to its acquisition of metro DWDM equipment supplier ONI Systems Corp on 21 June. Also, Ciena has not changed its forecast for its fiscal Q4/2002 sales (to end-October) of flat to slightly up on fiscal Q3 (benefitting from a full period of revenue from ONI).

A restructuring charge of USD75-80m will be taken in fiscal Q4 related to the job cuts, lease terminations, lease costs, and property and equipment write-downs. Since November 2001 Ciena has eliminated about 1,700 jobs (44% of its workforce), including 400 in February and about 650 in March, plus 225 from the combined workforce since the acquisition of ONI.

The most recent cuts will generate USD50-55m in annualised cost savings, including USD25-30m at the operating expense level, prior to restructuring-related charges. Most will be in place by the end of fiscal Q4/2002. The cuts will help it to reach its goal of lowering quarterly operating expenses to the mid-USD80m range by fiscal Q3/2003. Ciena has been aiming for a quarterly revenue break-even level of USD300m, but these cuts should lower that to about USD200m.

"We continue to support all of our product lines," stresses president and CEO Gary Smith, which include the MetroDirector K2 and the CoreDirector grooming switch.

"The actions taken today are part of Ciena's ongoing efforts to manage our business back to profitability as soon as possible without sacrificing what we believe are future revenue and growth opportunities," he added.

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