Last week, Ciena, the optical transport equipment vendor, announced unaudited financial results for its fiscal fourth quarter and year ended October 31, 2015.
For the fiscal fourth quarter 2015, Ciena reported revenue of $692.0 million as compared to $591.0 million for the fiscal fourth quarter 2014. For fiscal year 2015, Ciena reported revenue of $2.4 billion, as compared to $2.3 billion for fiscal year 2014. So far, so good.
Ciena’s net loss for the fiscal fourth quarter 2015 was $(13.8) million, or $(0.10) per diluted common share, which compares to a net loss of $(30.7) million, or $(0.29) per diluted common share, for the fiscal fourth quarter 2014. For fiscal year 2015, Ciena had a net income of $11.7 million, or $0.10 per diluted common share, which compares to a net loss of $(40.6) million or $(0.38) per diluted common share for fiscal year 2014. Here too, the results sound good.
“Our strong financial performance in fiscal 2015 included substantial increases in gross and operating margin as well as meaningful cash generation, which enabled us to exceed the longer-term financial milestones that we established several years ago,” said Gary Smith, president and CEO, Ciena. “We believe that our proven ability to drive operating leverage from the business, when combined with strong market drivers from the next phase of network transformation, positions us well to deliver continued growth and profitability in fiscal 2016 and beyond.”
However, company executives predicted sales for the current quarter of $555 million to $590 million, a unexpected sequential decline. In a call with analysts, Ciena CFO Jim Moylan described the reduction as “consistent with the seasonal reductions in order volume and customer deployment activity that we typically experience during that quarter.” The 8% to 9% revenue growth forecast fell short of analyst expectations. Apparently, they had anticipated that the incremental revenues from the Cyan acquisition would deliver a stronger kick.
You may think that 8 to 9% growth isn’t all that bad. (I wish my personal investment portfolio gained 8% this year.) However, the day after the earnings announcement, Ciena shares tanked 17%. Its not enough to do well, when everyone is expecting you to do really well.