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Ciena Corp. (NASDAQ: CIEN) started an optical communications stock price avalanche yesterday when it reported results from its fiscal third quarter of 2012. The fact that the company lost $29.8 million on a GAAP basis was bad enough. But when Ciena, which previously had done a better job than most of its competitors in increasing revenues despite the overall slowdown in the global economy, issued a down forecast for the upcoming quarter, many investors took that as a sign to head for the exits.

The optical transport systems vendor’s stock lost 20% of its value yesterday, closing at $13.46, after it reported $474.1 million in revenue for the quarter ended July 31. While that figure was essentially flat versus the previous quarter’s $477.6 million, it marked an 8.9% improvement year-over-year. Yet that bit of good news could not stand up to the disappointment created when Ciena management said they expect revenues for the current quarter to fall between $455 million and $480 million. This range fell well short of consensus forecasts of $501 million. Taking Ciena’s guidance as a sign that an expected rebound in carrier spending will not be as robust as hoped (if it happens at all), investors hammered both Ciena and other stocks in the sector. (To follow the performance of optical communications stocks, bookmark the Lightwave Optical Index.)

Speaking to analysts on an earnings call yesterday morning, CEO, President, and Director Gary Smith said that growing weakness in Europe and the fact that North American carriers were taking longer than expected to “operationalize” networks for which the company has supplied equipment offset comparative success in Asia Pacific and CALA in the third quarter. He said that he expects these trends to continue as well, which led to the disappointing forecast for fiscal 4Q12.

While he offered no predictions on when the situation in Europe would turn, he said that he expects North American carriers will indeed continue to buy and install Ciena equipment based on previously shared plans.

“In the dialogue that we're having with our major customers in North America, I would say that none of them are backing off from their strategic deployments and adoption of their infrastructure,” Smith asserted on the call. “That is not, I think, what is affecting the rollout of those new networks. I think it is more around the ability to operationalize those wins.

“And our assumption going into 2013 is the macro doesn't get appreciably any better,” he added.

Nevertheless, Smith expressed confidence that Ciena could continue to grow in such an environment by taking market share, particularly in such relatively new areas for the company as metro networking.

Author Stephen Hardy
Editorial Director and Associate Publisher

BT announced today it is further improving its reach into Russia through a new network interconnection agreement with Rostelecom, Russia’s national telecommunications operator.

The agreement will significantly improve BT’s ability to serve its corporate customers across all regions of Russia with its BT Connect portfolio of intelligent network services. BT Connect underpins mission critical applications for leading enterprises from a variety of industry sectors, including financial services, manufacturing, logistics, pharmaceutical and oil & gas industries.

BT already serves around 400 large organisations in Russia, including many of the world’s leading global multinational companies with operations in the country. Many local and international financial service providers rely on BT’s network to connect to the BT Radianz Shared Market Infrastructure, the world’s largest cloud based platform serving the needs of the financial services sector.

Rostelecom operates a highly sophisticated network that spans the whole country. Its national network consists of approximately 500,000 km of backbone infrastructure, providing services to approximately 43 million residential and enterprise customers.

Luis Alvarez, BT president, Europe, Middle East and Africa and Latin America, said “While the global economy is more unbalanced than ever, a growing number of multinational companies are expanding in Russia, including in the financial services sector. The success of that expansion relies heavily on the ability to adapt instantaneously to changing market conditions. High performance, fully secure networked IT services are absolutely key to that ability and BT is already a global leader in delivering such services. By substantially increasing the reach and capillarity of our network services across all Russian regions, this agreement with Rostelecom will help us maximize growth opportunities for our customers in important new markets.”

Calix, Inc has agreed to buy the FTTH product line of Ericsson for an undisclosed sum. The two companies also agreed that Ericsson would resell Calix’s newly beefed up access equipment portfolio worldwide.

The agreement centers on the Ericsson EDA 1500 GPON optical line terminal (OLT) and complementary portfolio of optical network terminals (ONTs). The companies expect the product line acquisition to close in the fourth quarter of this year. Calix expects operations related to the acquired assets to be accretive to non-GAAP earnings per share.
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Calix will offer jobs to as many as 61 U.S.-based Ericsson employees. The company also will assume ongoing support of the acquired products.

Ericsson, meanwhile, will sell both its old products as well as Calix Unified Access systems and software as its preferred options for fiber and VDSL2 applications in 180 countries for three years.

"This partnership provides Calix, already North America's fiber access deployment leader, with an extensive new global reseller channel, while our acquisition of Ericsson's fiber access portfolio delivers powerful new complements to our industry-leading Unified Access portfolio," said Carl Russo, president and CEO of Calix, via a press release. "This partnership, built on a clear alignment of corporate strategy and direction, allows Ericsson to fully leverage its strengths in wireless and end-to-end services while relying on Calix to provide innovation and expertise in fixed-line broadband access. We are excited about the opportunity to assume responsibility for development and support of Ericsson's fiber access business, and look forward to working closely with Ericsson and its broad customer base as a preferred global partner."

"We believe that this partnership will provide our existing fiber access customers with world-class support and maintenance, and an expanded portfolio of access systems and software from a leading company totally focused on access," said Jan Häglund, vice president and head of product area IP and broadband at Ericsson, in the same release

Vodafone is now using 100-Gbps technology from Ciena Corp. (NASDAQ: CIEN) to link two of its data centers in New Zealand. The links represent the first deployment of 100-Gbps technology in the country, Ciena asserts.

“Data use on Vodafone’s mobile network has grown by over 125% year on year and on our fixed network we’ve seen a 90% year-on-year increase,” said Vodafone’s Chief Network Officer Tony Baird via a Ciena press release. “Now many customers have started using the Internet, email, and applications like Facebook on their smartphone, and their home network for content like TV and movies, it is rapidly becoming a way of life and this trend shows no sign of slowing.

“Upgrading the network between our two Auckland data centers to the fastest in New Zealand means we can stay ahead of the curve for our customers with the ever increasing use of bandwidth intensive data services,” Baird concluded.

Vodafone installed the coherent-based 100-Gbps technology on its Ciena 6500 Packet-Optical Platforms. The installation did not disrupt existing services because the new 100-Gbps capabilities can run alongside existing 10- and 40-Gbps channels, Ciena says.

“Service providers across the globe are looking to improve their network efficiency and reliability while also expanding capacity to meet surging demand from a new breed of smartphone and tablet users,” says Anthony McLachlan, Vice President and General Manager, Asia Pacific, Ciena. “Vodafone New Zealand is an excellent example of a company with the forward vision to deploy network technologies that suit their present-day requirements and also lay the groundwork to support future expansion and network services at speeds that reach 100 Gbps and beyond.”