The company’s results were consistent with its forecast and slightly better than the analysts’ consensus. What is hurting the stock is Ciena’s fourth-quarter outlook, which it prefaced by saying that it expects next quarter’s results to be “impacted by several significant variables that contribute to a broader range of potential outcomes for both revenue and gross margin than typically expected.”
Accordingly, revenues are forecast at $670 million to $610 million, well below the current consensus call for $628.9 million. Adjusted gross margin is forecast by the company in the high 30% to low 40% range. Actual adjusted gross margin was 44.3% in the third quarter, up from 43.1% in the second quarter. Ciena also forecast adjusted operating expenses at $210 million, consistent with its $206.3 million spent in each of the past two quarters.
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Sales in the company’s largest division, converged packet optical equipment, rose about 26.5% year over year from $302 million to $382 million, approximately 63% of Ciena’s total revenues.
Sales outside the U.S. comprised 39% of total sales, and one customer, AT&T Inc. (NYSE: T), accounted for 21.6% of total revenue, down a tick from 21.5% of revenue in the second quarter and up significantly from 16.5% of revenue in the fourth quarter of 2013.
The company’s CEO said:
As we expand our addressable market by targeting high-growth, high-value segments, we are confident in our opportunity to grow the business and drive additional operating leverage in 2015.
Perhaps the conference call will shed some light on that ghastly revenue forecast. Shares could really get slammed if there is no reasonable expectation that the current quarter is an anomaly.
Shares were pounded on the sour outlook. Premarket trading had Ciena down nearly 10% at $18.45, barely in a 52-week range of 18.00 to $27.94. Thomson Reuters had a consensus analyst price target of around $28.40 before the results were announced.
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