Yesterday, Ciena (Nasdaq: CIEN) put out an earnings announcement that more or less tracked its earnings pre-announcement from two weeks ago. The telecom equipment maker's performance has also been pretty steady over the past year.
It reported a first-quarter loss of $0.16 a share -- slightly better than the $0.17 to $0.18 loss it thought it would be facing -- and a sequential revenue decline of 6% since the fourth quarter of 2003. The year-on-year decline in revenues was also 6%. The business continues to burn cash at a steady clip -- down $60 million since last quarter, which matches the $240 million annual cash-burn rate over the past year.
But perhaps the most interesting bit of information in the release is exactly how much cash the business still has in its coffers: $1.05 billion in cash and short-term marketable securities, plus another $466 million in long-term investments. (While we do not classify long-term investments as a "cash equivalent" -- see the Fool's handy dandy Glossary for the definition -- this is still something to bear in mind.)
Cash-wise, that gives the company $2.22 in cash and cash equivalents per share, or more than one-third of its market cap. This suggests that the stock is worth looking at as an asset play or, as some call it, a Green Gene.
With that aspect of the company in mind, I did a little further digging... and struck rock.
While Ciena has a goodly pile of cash, it also has a stack of convertible debt piled up in the corner -- $690 million worth. That, too, needs to be considered when calculating a company's Green Geneliness.
Moreover, management just announced its intention to purchase two privately held companies, Internet Photonics and Catena Networks, in an effort to strengthen its own position as a "broadband solutions" provider. Paid for in stock, these transactions will not deplete Ciena's cash pile.
However, the acquisitions will dilute existing shareholders by 21.5%, as shares outstanding rise from 473 million to 575 million. While we do not know whether (or how much) cash Internet Photonics and Catena will bring to the table, Ciena's contribution to cash-per-share will decrease to $1.83. And when you subtract out the convertible debt, that figure drops to $0.63 -- or only 10% of the company's market cap.
While that number is not insubstantial, I do not think it qualifies Ciena for Green Gene status.
Motley Fool contributor
Rich Smith
owns no shares in any of the companies mentioned here.
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