No Optical Illusion at Ciena (from the WSJ)
The superstitious set can breathe a bit easier about Ciena CIEN -1.03% after the supplier of fiber-optic networking equipment appeared to be tempting fate.
Its fiscal third-quarter earnings report came on Aug. 30—the day the Nasdaq Composite hit its all-time high. Ciena’s results were strong enough then to grant the stock immunity from the global selloff that has whacked most other tech companies since then. The Nasdaq slid nearly 13% from that point while Ciena’s share price jumped 18%.
That set a high bar for the company’s fiscal fourth-quarter results Thursday morning. They easily cleared the bar. Revenue jumped 21% year over year to $899 million, beating Wall Street’s target by 4%. Operating income surged 72% to $95.9 million. The results brought Ciena’s full fiscal-year revenue growth to 10.4%—the highest in five years. The stock rose 8% midday Thursday.
Ciena also projected 7% revenue growth for the coming year, above the 6% projected by analysts. The company has been diversifying its business thanks to technology giants such as Amazon.com , Microsoft and Google, which buy Ciena’s gear for their massive networks of data centers. One of those—Ciena won’t say which—has now joined AT&T and Verizon in accounting for more than 10% of the company’s sales over the past two quarters.
Capital spending by those companies can be a bit lumpy. Morgan Stanley projects that cloud capital spending will rise 14% in 2019—a deceleration from the 28% growth the broker projects for this year. But even that will likely outpace what Ciena’s traditional customers, more debt-laden telecommunications carriers, can afford. Wall Street expects AT&T’s and Verizon’s capital budgets to stay largely flat in 2019. With its stock price now up by two-thirds for the year, it helps that Ciena knows where the deepest pockets lie.