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Sales Growth Delays Keep Ciena in the Red
Company Continues Cost-Cutting Effort

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Ciena signed deals with Verizon and SBC Communications, but has yet to see revenue grow meaningfully as a result, chief executive Gary B. Smith said. (Kevin Clark -- The Washington Post)


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By Yuki Noguchi
Washington Post Staff Writer
Friday, May 21, 2004; Page E05

Ciena Corp. announced slower-than-expected sales and increased losses, as its customers continue to hold back on buying the telecommunications network equipment the Linthicum-based company makes.

Ciena's stock closed 13.7 percent lower at $3.35 a share after it announced its financial results.

"There are two issues: One is performance, and another is performance for the future," and so far Ciena has disappointed on both fronts, said Susan Kalla, an analyst with Friedman Billings & Ramsey Co. "The ship did not come in."

During its second fiscal quarter ended April 30, Ciena lost $76.2 million (16 cents a share) on revenue of $74.7 million. That compares with a loss of $75.5 million (17 cents) on revenue of $73.5 million in the same quarter a year ago.

The company signed big customers like Verizon Communications Inc. and SBC Communications Inc. during the quarter, but that has not translated into a much-needed boost in sales yet, Ciena's chief executive said.

"We have yet to see these positives turn into meaningful and predictable revenue growth," chief executive Gary B. Smith said in a conference call.

Smith added, "Short-term, admittedly, there's continued uncertainty around things outside our control, and that leads us to be appropriately cautious."

The company is continuing to try to cut costs and expand its product offerings. Earlier this month, it closed on previously announced deals to acquire two small, private companies -- Catena Networks and Internet Photonics -- which will add an undisclosed amount of future revenue, he said.

To cut costs, the company laid off 76 employees during the quarter, and in September will close its San Jose operation, laying off 425 employees. Both moves were previously announced. The layoffs will reduce the company's annual costs by between $60 million and $70 million, Ciena officials said. At the end of April, the company employed 1,702 people. It will gain 380 employees when it closes the Catena and Internet Photonics deals.

Ciena revamped its sales organization to focus on different segments of customers, such as cable and government customers, Smith said. The company has nearly $1.5 billion in cash, cash equivalents and investments.


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