Thursday morning, wide-area networking specialist Ciena
What analysts say:
- Buy, sell, or waffle? Twenty-three analysts follow Ciena's every move. The "buy" and "hold" camps each have 11 occupants, while the last one screams "sell" with a rebel yell. Our own Motley Fool CAPS investor community gives this company a two-star rating today, based on 204 data points from our users.
- Revenue. $203 million would satisfy the average analyst, up 33% from $152.5 million last year.
- Earnings. The Wall Street crowd expects about $0.31 per share, give or take a couple of pennies, in pro forma results. That's up significantly from the year-ago $0.14 per share.
What management says:
I find the tagline for Ciena's flagship platform incomprehensible, yet strangely compelling. "Reduce Convergence Insufficiency -- Ciena FlexSelect Architecture" is the battle cry, and it makes me want to go out and reduce my convergence insufficiencies right now -- if I could just figure out what that means.
I'll have a stab at that definition in a minute. But first, a few numbers.
What management does:
When you see a sharp change in these rolling metrics, it's usually a sign of one of two things: An extraordinary quarter opposite of that change rolled off the 12-month calendar at that point, or some sort of merger or spinoff activity pulled the financial statements up by their bootstraps.
That's not the case this time, though. The boosted results in last year's October quarter were organic in nature, the result of tighter operations and wider market acceptance of the company's products. And as you can tell by the fairly steady sales growth pattern, that's an ongoing story.
|
1/2006 |
4/2006 |
7/2006 |
10/2006 |
1/2007 |
4/2007 |
|
|---|---|---|---|---|---|---|
|
Gross |
35.9% |
41.4% |
44.7% |
46% |
46.5% |
45% |
|
Operating |
(31.7%) |
(20%) |
(8.3%) |
(1.4%) |
2.1% |
3.9% |
|
Net |
(85%) |
(65%) |
(50.8%) |
0.1% |
2.9% |
4.9% |
|
FCF/Revenue |
(28.3%) |
(22.3%) |
(17%) |
(17.2%) |
(12.9% |
(3.6%) |
|
Y-O-Y Growth |
1/2006 |
4/2006 |
7/2006 |
10/2006 |
1/2007 |
4/2007 |
|---|---|---|---|---|---|---|
|
Revenue |
38.5% |
34.8% |
33.6% |
32% |
34.4% |
39.7% |
One Fool says:
Management credits its FlexSelect networking platform for its success. That's a network model built on quick change, where simple software-based adjustments take the place of ripping out and replacing router and switch hardware in the data center. The idea is to enable customers to transition from one network model to another with a minimum of fuss and heartache.
That platform ties together physically different services, including Ethernet data traffic, voice and video circuits, and WAN networks like DSL and cable modem uplinks, on a single management platform. A Ciena FlexSelect network sort of glues all of these things together, making it a logical choice for telecom and cable operators and others with years of build-as-you-go networks in their infrastructure. "Convergence insufficiency" is a term roughly equivalent to "cross-eyed," and Ciena wants to bring some clarity and focus to your data center.
So it's no surprise to see the company listing customers like AT&T
And as the numbers above show, the strategy is getting some serious traction right now. It makes plenty of sense, for reasons it would take me a short essay to detail here, and the window of opportunity should remain open for a few years. Godspeed, Ciena -- you're on a highway to medium-term success.
AT&T is a former Motley Fool Stock Advisor pick, but our newsletter analysts don't appear to like networking companies very much these days. Find out why with a bundle of free 30-day trial passes at your side.
Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check outAnders' holdings if you like. Foolishdisclosure is the prognosticator of prognosticators.
