The following article contains a new potential customer of great significance not previously mentioned here, as best as I can tell: Bell Atlantic. See BOLD sections below:|
2/20/98 Daily Rec. (Balt. Md.) 1
1998 WL 9506981
The Daily Record (Baltimore)
Friday, February 20, 1998
Ciena Stock Trades Halted Rosy Earnings Overshadowed by WorldCom Move
Daily Record Business Writer
Nasdaq yesterday halted Ciena Corp.'s after-hours stock trading
after the Linthicum-based telecommunications equipment manufacturer
announced a big customer has suspended shipments until next fall.
Jackson, Miss.-based WorldCom has informed Ciena that it will
deploy the company's dense wave multiplexing equipment (DWDM) on an
as-needed basis. That contrasts with the long-distance carrier's
previous plans to install two year's worth of network capacity
WorldCom's bomb dampened Ciena's otherwise rosy earnings
announcement. Ciena reported first quarter revenue for the period
ended Jan. 31 of $134.3 million and earnings per share of 37 cents,
which beat analysts' consensus predictions of $129.8 million and 35
cents per share.
The earnings per share were 185 percent higher than the 13 cents
per share earned during the same period last year.
Ciena's stock price closed yesterday at 58 1/8, up 3 1/8. The
earnings report was not released until after the end of the normal
John Sidgmore, WorldCom's vice chairman and chief operating
officer, issued a statement apparently intended to calm Ciena
investors. "Ciena has been and remains our DWDM supplier of choice," said Sidgmore. "During 1997, Ciena delivered more capacity at a faster
rate than we frankly felt was possible. As a result, our long-
distance capacity deployment is ahead of schedule.
"While there may be a short-term slowdown in WorldCom's order rate
to Ciena, WorldCom ... intends to aggressively provision the capacity
afforded by Ciena's DWDM systems throughout our growing network,"
Mark Lutkowitz, a consultant to the telecommunications industry
for Birmingham, Ala.-based Trans-Formation Inc., said the
announcement just amounts to delayed orders for Ciena. "That's not really bad news," he said. "It would be much worse if they [WorldCom] said they weren't coming back." Lutkowitz added that next fall may be the time that WorldCom completes its acquisition of MCI Communications. In that case, WorldCom may actually come back as a much larger customer.
But any suspension of business has a magnified effect on Ciena
since its customer list is very short. Patrick Nettles, Ciena's
president and chief executive officer, issued a statement yesterday
that recognized that circumstance.
"In the past, we have cautioned investors about the potential for
fluctuations in quarterly results as a result of our highly-
concentrated customer base," he said. "We intend to move
aggressively to offset the majority of the revenue shortfall from
WorldCom ... from existing and potential customers."
Lutkowitz said the shortfall is very likely to be offset by new
business from one huge "potential customer" -- Bell Atlantic. He
said he expects Ciena to announce a deal with that local exchange
carrier shortly. [Korn: Did anyone know this today???]
Nettles said that Ciena's earnings should be viewed as especially
good, considering that the company is making extraordinary
investments in transforming itself to a multi-product company.
Ciena also acknowledged developments at the company that could
positively impact results in 1998. In the next three months, Ciena
will deliver its first 40-channel DWDM unit. Most Ciena competitors
have yet to deploy Ciena's standard 16-channel unit.