Ciena Corp posted a wider-than-expected quarterly loss due to rising costs, sending its shares down 4.8 percent in early trade despite revenue that handily beat Wall Street estimates.
Even Ciena's prediction that current quarter revenue would also beat estimates failed to cheer up investors who are also nervous about how Ciena will handle its acquisition of a Nortel Networks Corp unit that is seen doubling its size.
The mystery is still what the earnings power is on a combined basis, said Avondale Partners analyst Blair King referring to Ciena's plan to spend $769 million on Nortel's
optical networking and carrier ethernet unit.
The analyst said that Ciena's improving demand was likely due to orders of optical network equipment from AT&T Inc , which is beefing up wired connections to its wireless towers to improve its network performance.
The good news is that optical spending seems to have rebounded in North America. I would say the primary build is North America, King said.
Ciena, a supplier of optical switches and other equipment used to direct Internet traffic, posted a loss of $26.7 million, or 29 cents per share for its fiscal fourth quarter ended October 31, compared with a loss of $25.4 million, or 28 cents a share in the same quarter a year before.
Excluding unusual items, Ciena's loss would have been 12 cents a share in comparison to Wall Street expectations for a loss of 7 cents a share, according to Thomson Reuters I/B/E/S.
Revenue fell to $176.3 million from $179.7 million but was well ahead of the average analyst expectation for revenue of $167.7 million, according to Thomson Reuters I/B/E/S.
The company attributed the stronger-than-expected revenue to strong demand for certain products including carrier ethernet products and core switching platforms.
It said that a single North America-based customer accounted for 19 percent of its fiscal fourth-quarter revenue but did not name the customer, which King said was likely to be
The company said that cautious customer spending seems likely to continue. However, it said that its order flow gives it confidence that it could see a sequential revenue increase of up to 5 percent for the current quarter.
This would imply fiscal first-quarter revenue of $185 million, well ahead of analyst expectations for revenue of $171.66 million for the quarter.
Ciena said that the guidance was limited to its own business and did not include its upcoming acquisition of the Nortel unit. Earlier this month Ciena won a bid to buy the business from the bankrupt company after it fought off a legal challenge from Nokia Siemens Networks, a venture of Nokia and Siemens .
It has said that it expects the deal to close in the first calendar quarter of 2010.
Ciena shares fell 4.8 percent to $12.60 in premarket trade after closing at $13.23 in the regular Nasdaq session.
(Reporting by Sinead Carew, editing by Gerald E. McCormick, Dave Zimmerman)