CIENA (CIEN): I was going to write a substantial piece on CIENA, but Prof. Zucchi saved me the trouble.

Here, I'll summarize his thoughts -- all of which I agree with -- and add some emphasis and additional points of my own.

  • I've written calls against CIENA at many points in the past as a hedge or premium collection strategy. This morning I would rather have puts, but I'm generally more of a premium collector with my option strategies. But, like Fil, I won't be hedging any stock at these historically low levels.

  • Not only is CIENA back to 2002 lows, it has gotten there while producing positive EPS and cash flow and has a massively broader product portfolio today than it did during the 2002 nadir. Back during 2002, CIENA was fighting massive year-over-year declines in revenue and a pretty substantial quarterly cash burn.

  • Traffic growth today, while it may currently be slowing, still has many more growth catalysts - due mainly to a multitude of video applications not operative in the post-2002 networking cycle, which was mainly dependent on the very beginning of the Fios build and a muted pickup in post-Y2K enterprise spending.

  • The carriers, even while experiencing pressure from macro economic conditions have consolidated 3 industries industries into one, with wireless being the crown jewel. They now have more diversified and stable revenue/cash flow streams than they had during the 2001-2004 timeframe. Wireless traffic growth is now part of the core carrier mix, and traffic growth from 3G and wifi-enabled devices is just starting to show explosive expansion. So while conditions may dictate delays in network spending, those delays should be shorter lived than in past cycles.

  • The competitive landscape has changed dramatically since 2002 (for CIEN), with many competing technologies and/or companies no longer threatening. The one real new threat here (longer term) might be Infinera's (INFN) PIC technology. However, even with Infinera, CIENA's position is firmly at the top of its space, whereas in 2002 only a few experts in the space would have acknowledged CIENA's potential for leadership.

  • There's been talk of CIENA merging; they almost did at least once in the past. At these historically low levels, CIENA's assets, product pipeline, IP and strong customer relationships could certainly fetch materially more than the current print.

No doubt CIENA today is a disaster for longs (as the guidance was). But at this level, I'm still hanging on, and hoping for a more rational valuation picture to emerge.