A Tech Titan Moving at the Speed of Lighthttp://www.fool.com/investing/general/2011/01/24/a-tech-titan-moving-at-the-speed-of-light.aspx Tim Beyers
January 24, 2011
I'm a believer in growth stocks. As an analyst for our Motley Fool Rule Breakers service, I think you should be a believer too. But even I have to admit some growth stories are bogus, hence this regular series.
Next up: Ciena (Nasdaq: CIEN ) . Is this supplier of communications equipment the real thing? Let's get right to the numbers.
Data current as of Jan. 20.
Most Fools think little of Ciena's model, and for good reason. The company hasn't produced profits or meaningful cash flow since 2008, and its record in the years before is spotty at best. CEO Gary Smith has a plan to change all that, but doing so will require flawless execution and smart integration of assets acquired from Nortel Networks (NYSE: NT ) . This is a company with a lot to prove.
And yet the idea behind Ciena makes sense. Unlike Cisco Systems (Nasdaq: CSCO ) or Juniper Networks (Nasdaq: JNPR ) , Ciena pitches whole platforms of optical networking gear with programmable software for handling complex data loads and high volumes over a long distance. Exactly the sort of infrastructure you'd expect for the modern Internet, in other words.
"Having spent 30-plus years working for a very large telco I can attest to the fact that a paradigm shift in telephony is occurring today. As subscribers abandon their copper-fed home telephone service in favor of cell phones, the remaining pipe to that home is DSL. Those DSL connections are rapidly being converted to naked DSL -- that is, a DSL pipe that does not require an associated telephone number on the copper cable pair," wrote Foolish investor ssouvigny in April.
The implication? Consumers and business are unplugging copper-dependent services, and in the process making room for fiber-enhanced services. Ciena's equipment was built to deliver data over fiber.
The elements of growth
Source: Capital IQ, a division of Standard & Poor's.
Not surprisingly, there isn't much to like about Ciena's performance over the past three years. Let's review:
Competitor and peer checkup