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CIENA surprises analysts
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February 19, 1999: 1:48 p.m. ET
Telecom equipment maker posts 1Q net, says business is 'rock solid'
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NEW YORK (CNNfn) - The president and chief executive of telecom equipment maker CIENA Corp. says fiscal first-quarter earnings that surprised Wall Street analysts show his company's business is "rock solid."
The company Thursday posted net income of $2.3 million, or 2 cents per share, vs. $39.7 million, or 37 cents per share, in the same quarter a year earlier. Analysts polled by research firm First Call expected the company to report a loss of a penny in the first quarter.
Following this surprise CIENA's (CIEN) president and CEO, Patrick Nettles, spoke with CNNfn about the company's future.
A partial transcript of his "Business Day" comments follow.
JACK CAFFERTY, CNN ANCHOR: Mr. Nettles, good morning. Give us your take on these earnings numbers. How far are they going to go toward putting investors' minds at ease about the future of the company?
NETTLES: Good morning, Jack. I think that what the numbers show is we've got momentum. Our business is rock solid. We've got a balance sheet that is very strong. I think the ability to deliver has been one of our key competitive advantages.
DEBORAH MARCHINI, CNN ANCHOR: Have you been able to deliver much in the way of new business? You've got a new contract with Telemonde. I wonder how much you expect it's going to add to your revenues and earnings for the three years it covers.
NETTLES: This is a $200 million deal. According to Telemonde. They have very ambitious plans. These are very big infrastructure builds going on in Europe. We're really pleased to be part of it.
MARCHINI: There's some hopes though, on Wall Street, it seems, that you would bring in -- you'd reel in an even bigger fish so to speak. Any other contracts in the works?
NETTLES: Well, we have a lot of things going on. I think the big change in our business has been the diversification of our customers. We've gone from five customers a year ago to nearly 20 at this point and we've got a few more to go. So, we're very pleased with that.
CAFFERTY: How much of that client base expansion was dictated by the MCI situation, Mr. Nettles?
NETTLES: I would say it was really more dictated by the changes in the market. Optical networking is at the core of the Internet. That's what we're all about. This is how the Web pages are brought home. We're, I think, at the point of delivering band width and that's moving around the world.
CAFFERTY: Speaking of around the world, let me ask you about Europe. Recently, your industry has been deregulated over there, and it would seem that a company like yours could make some hay on the continent. How aggressively are you trying to expand your business over there?
NETTLES: That was a key strategy for 1998. We started to invest in infrastructure. We're continuing to invest. We've had big success there, I would say. Telemonde is the latest example of that.
MARCHINI: Let me talk to you about prices for your telecommunications products. What's been happening in the area of prices? Are prices coming down?
NETTLES: Prices did come down in the latter part of 1998. We believe that prices have stabilized now. We've also been working very hard on our cost. Because of our ability to deliver in volume, we believe we have the best position to deal with that.
MARCHINI: Do you see merger in your future?
NETTLES: We clearly have indicated our behavior in the last year that we're willing to consider a deal in the right strategic circumstances. We weren't looking to sell the company then. We're not now.
CAFFERTY: Can you give us some idea of what sort of numbers you have in the back of your mind as the rest of 1999 unfolds? You've had a pretty good earnings report based on expectations in the last quarter. What do you see for the next couple of quarters out?
NETTLES: Well, I think the analysts have us pretty well pegged in terms of the consensus reports. We're comfortable with those.
MARCHINI: All right. We want to thank you very much. Patrick Nettles of CIENA, president and chief executive officer, joining us from Washington today.
NETTLES: Thank you, Deborah.
CIENA stock was up 1-1/2 to 22-3/8 in Friday afternoon trading.
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