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Ciena Beats Expectations, Tracks Higher


Leader in networking space a good long-term growth play.

Ciena (CIEN) is out with earnings today that beat expectations, see the report here for details.

"Ciena, which sells optical switches and other products that support Internet protocol (IP) networks, said it was optimistic about its outlook. The company forecast full-year revenue growth of up to 27 percent, better than the average analyst forecast of 22 percent growth according to Reuters Estimates.

This is a slight bump in full year guidance, and the big rub last quarter was that CIEN sandbagged its full year guide.

"While we are mindful of the macro economic environment, indications from our customers to date suggest no change in the fundamental drivers of Ciena's business: the demand for increasing network capacity and the transition to ethernet/IP-based network infrastructures," Ciena Chief Executive Gary Smith said in a statement.

Accordingly, we remain optimistic about our outlook for the year."

This statement talks about the company being optimistic. In the context that it's guiding up slightly in a world where everyone else is guiding lower, management is optimistic, however, my view is that CIEN is being cautious and still offering conservative guidance again on their full year.

Adjusted earnings rose to 47 cents from 22 cents, far exceeding the average analyst forecast of 39 cents, according to Reuters Estimates.

This 8 cent beat is about the same as last quarter, when the stock got killed, despite being the 3rd out of four quarters CIEN has really delivered strong quarterly results.

I still view CIEN as one of the best growth stories in the networking space and its leveraged to spending from all aspects of ISP buildouts (both telecomm and cable). CIEN also has some very strong activity in a couple European builds that will help to fuel growth a couple quarters from now.

As a tertiary point, AT&T (T) has been the lone U.S. based global ISP that has really strung out its spending the last few years, holding back and causing lot's of lumpy results with other bandwidth arms dealers. Given a string of recent announcement it looks like T is fully embracing the more robust, and newer bigger pipe technology that is proliferating through the space. The bandwidth arms dealers levered to T could experience some upside for the next few quarters, even given the sluggish economic backdrop.

ACD Telecommunications (ADCT) just had a strong quarter as an example. Prof. Zucchi has also talked about Tekelec (TKLC). I will need to look to see if TKLC is levered to T's future spending plans.
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Position in CIEN

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