They say everybody loves a winner, and judging from the great amount of attention spawned by Ciena's (NASDAQ:CIEN) return to profitability after a five-year hiatus, the saying holds true.

True to form for a Fool, therefore, I'm going to cut against the grain today, play a little devil's advocate, and tell you why the networking equipment and software maker's much-trumpeted success isn't all that big a deal. Or at least I'm going to try. Wish me luck.

Headline news
Before I start the Ciena bashing, let's point out the good news real quick:

  • Sales for the fourth quarter grew 35.3% year over year, better than the full year's 32% growth rate.
  • Profits came in at $0.14 for the quarter, a heckuva lot better than last year's $3.06 Q4 loss. What's more, the firm ended the full year with a penny-a-share profit under generally accepted accounting principles. What's more than more, all of these are GAAP results, rather than pro forma estimates cited in our Foolish Forecast -- which estimates, incidentally, Ciena thrashed when it reported $0.16 in "adjusted earnings."
  • Gross margins continued their climb, rising 560 basis points to 45.5% for the quarter, and 1,380 basis points to 45.7% for the year.
  • Looking forward, Ciena predicted "low single-digit sequential revenue growth in our fiscal first quarter 2007 ... [a]nd growth improving during the balance of the year."

The subtext
Back when Ciena wouldn't have known a GAAP profit if it bit it in the router, it tended to avoid the metric in its earnings reports. Instead, it focused on metrics such as revenue growth (which has been strong for some time), and gross margin improvement (likewise). So this Fool couldn't help but notice that in Thursday's earnings report, the words gross margin didn't appear once. Why is that, especially when the year-over-year Q4 improvement in the gross looks so darn good? Perhaps it's because Thursday's numbers showed the second-in-a-row sequential decline in gross margins, from 48% in Q2 to 47% in Q3 to 45.5% now.

Mind you, I could care less about quarter-to-quarter fluctuations. Whenever possible, I take the long-term view and compare one year's quarter with the same quarter of the previous year. Ciena, however, has always emphasized sequential growth -- until Thursday, when it became inconvenient to do so. For that, I call foul.

Cash flow reverses (in a good way)
More significant than margins, to this Fool's eye, is the fact that while Ciena has emerged into the black under GAAP, it remains unprofitable based on free cash flow. But its negative free cash flow of $97.2 million this year shows that it's not burning cash at nearly the rate of the $139.3 million it burned it in fiscal 2005.

In the final analysis, I continue to see room for improvement at Ciena. Whether you view that as good or bad, in an industry that includes the likes of Cisco (NASDAQ:CSCO) and Nortel (NYSE:NT), is up to you.

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Fool contributor Rich Smith does not own shares of any company named above.