Ciena expects slow start, fast finish to FY 2016
Coming off a very healthy fiscal 2015, Ciena Corp. (NYSE: CIEN) says it expects continued success in the coming 12 months, including 8% to 9% revenue growth. But that growth won't manifest itself immediately; in fact, the company disappointed Wall Street by forecasting a sequential revenue slide greater than expected for the first quarter of the new fiscal year.
Ciena reported today that it recorded $692.0 million in revenue in the fourth fiscal quarter of 2015, which ended October 31. That compares to $591.0 million in the year-ago quarter; it also beat consensus forecasts among financial analysts of $684 million.
However, company executives predicted sales for the current quarter of $555 million to $590 million, a significant sequential decline and well off from the $638 million consensus expectations among the financial community. In a call with analysts, Ciena CFO Jim Moylan described the reduction as "consistent with the seasonal reductions in order volume and customer deployment activity that we typically experience during that quarter."
In addition, the 8% to 9% revenue growth forecast also fell short of what Wall Street expected (although it exceeds the mid-single-digit growth Ciena executives believe the overall optical transport market will experience in 2016). Ciena predictions for revenues from products added via the Cyan acquisition – which had a significant spike in the recently completed quarter, which may have accounted for the fact that sales beat estimates – do not appear to be as rosy as some analysts believed.
"Many may have over-estimated the Cyan contributions, leading to a lower organic estimate," explained Simon M. Leopold, communications equipment analyst and managing director at Raymond James in a note written earlier today. "We believe Cyan experienced a significant pull-in during October and Z-Series sales will drop to about $30 million from $84 million and decline over time."
Asked for details about the disappointing current quarter and FY 2016 estimates, particularly in light of expected spending directed at metro networks and data center interconnect, President and CEO Gary Smith said these revenue drivers are indeed in place, "it's really just an issue of timing and the slope of the ramp." Both Smith and Moylan said during the call that the financial community may have overestimated the speed with which Ciena's customers would deploy their systems.
Looking at the most recent numbers in more detail, the fourth quarter of fiscal 2015 saw a GAAP net loss of $13.8 million ($0.10 per diluted common share), an improvement over the GAAP net loss of $30.7 million ($0.29 per diluted common share) for 4Q14. On a non-GAAP basis, net income for the just concluded quarter was $67.3 million ($0.42 per diluted common share), a substantial improvement over the non-GAAP net loss of $8.2 million ($0.08 per diluted common share) for the year-ago quarter.
For the full year, Ciena enjoyed GAAP net income of $11.7 million ($0.10 per diluted common share), a much better result than the GAAP net loss of $40.6 million ($0.38 per diluted common share) for fiscal year 2014. Non-GAAP results were, of course, even rosier. Adjusted net income was $179.0 million ($1.31 per diluted common share), again up from fiscal 2014's $65.8 million net income ($0.59 per diluted common share).
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Stephen Hardy | Editorial Director and Associate Publisher
Stephen Hardy has covered fiber optics for more than 15 years, and communications and technology for more than 30 years. He is responsible for establishing and executing Lightwave's editorial strategy across its digital magazine, website, newsletters, research and other information products. He has won multiple awards for his writing.
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