Ciena Reports Deepening Loss

Once a promising startup riding telecom euphoria, Ciena Corp. continues its financial free fall. Yesterday, it posted another quarter of deepening losses.

"We are seeing our customers go to extreme measures to preserve cash," resulting in sharply fewer sales and dissipating revenue, said Ciena president and CEO Gary Smith. For its second quarter, ended April 30, Ciena lost $612.2 million on revenue of $87.1 million, down from a $50.7 million loss on $425.4 in revenue for the same quarter a year ago.

With no immediate relief, Smith predicted that Ciena's third-quarter revenue will be no better or even worse than the second quarter's, although the company cut its workforce and other expenses last quarter. Ciena makes optical-transmission and switching equipment for telcos, an industry that is suffering its worst downturn ever.

The return to financial health in the telecom sector, "is going to be a long road for everybody," says Ron Kline, an analyst with RHK Inc. While Ciena's results were worse than he expected, "they're indicative of a really bad market rather than the company's performance."

Ciena has been hurt especially by the drop in spending by long-haul carriers. Its troubles aren't expected to go away until struggling telcos return to profitability and trim excess capacity in their backbone networks, says Kline. He predicts the return of the telecom sector probably won't occur before the second or third quarter of next year.