Ciena announced their 2013 Q4 results today. Although revenues were very strong at $583.4 million, above even the high-end of their guidance of $515 to $545 million, adjusted earnings per share (EPS) were only $0.16 compared with expected $0.24. GAAP gross margin also slipped sequentially from 42.4% in the previous quarter to 39.7% in 4Q13. The company’s share prices fell sharply by 6% to $21.50. These figures include the optical networking portions of Nortel’s Optera metro transport business that were purchased in 2010.

Gary Smith, president and CEO of Ciena was quite upbeat about the performance in their press release: “This performance validates the strategic market differentiation we’ve established with our OPn architecture, our unique approach to customer engagement, and our continued technology innovation. These differentiators will help us continue to grow revenue and increase operating leverage in 2014.”

Ciena is classified as a “growth” stock, and investors want and need to see the revenue growth. But it is no longer in a start-up mode. Investors are easily disappointed when they suspect that sales come at the cost of low margin.