Ciena slashes outlook on spending downturn

September 4, 2008: 9:16 AM ET

By Scott Moritz

The spending slowdown hitting the technology industry has slammed Ciena (CIEN), the telecommunications equipment maker. In an earnings report Thursday, the company cited a drop in customer orders in slashing its fourth-quarter sales forecast 24% below expectations.

Ciena's third-quarter sales and earnings were solid despite signs of sluggish demand from corporations. The Linthicum, Md.-based company posted adjusted earnings of 37 cents a share, down from 41 cents in the year-ago period, but in line with analysts' estimates. Sales for the quarter were $253.2 million, up 23% from last year and also in line with Wall Street targets.

But looking ahead, Ciena warned that "order delays from many of our tier one service provider customers," would likely result in fiscal fourth-quarter revenue in the $200 million range. The projected sales shortfall is well below the $263 million level analysts had been expecting.

Ciena shares fell 17% in pre-market trading Thursday.

"While current economic conditions warrant a cautious near-term outlook, the fundamental drivers of our business - growing capacity demands and the transition to more efficient, more powerful, automated networks - remain sound," Ciena CEO Gary Smith said in a press release.

Ciena is somewhat of a niche player in the global networking sector, but its headwinds hint that spending cuts among big telcos continues and may be steepening. Rivals like Cisco (CSCO) and Ericsson (ERIC) were down 1% in early trading on news of Ciena's big miss. Ciena also joins Corning (GLW) as the second tech shop to warn of slumping orders in recent days.

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