UPDATE 3-Ciena says caution spreading but demand robust
Tue Oct 7, 2008 4:24pm EDT Email | Print | Share| Reprints | Single Page | Recommend (1) [-] Text [+] Market News
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NEW YORK, Oct 7 (Reuters) - Ciena Corp (CIEN.O: Quote, Profile, Research, Stock Buzz) said the financial crisis is making more customers cautious, but demand for its communications equipment should remain solid as phone companies still need to upgrade networks.
Ciena sells optical switches and other products that support Internet protocol networks to "Tier 1" phone carriers such as AT&T Inc (T.N: Quote, Profile, Research, Stock Buzz), Verizon Communications Inc (VZ.N: Quote, Profile, Research, Stock Buzz) and Sprint Nextel Corp (S.N: Quote, Profile, Research, Stock Buzz), as well as smaller providers and business customers.
Ciena Chief Executive Gary Smith told analysts in a meeting on Tuesday that the recently weaker economy and financial sector have affected sentiment.
"You're seeing that uncertainty trickle through to some of our enterprise customers and some Tier 2 customers," he said. The company had previously observed caution among its Tier 1 phone service providers.
Ciena shares fell 7.7 percent to close at $7.87, weighed down by the overall market's bearish sentiment. The Nasdaq composite index .IXIC fell 5.8 percent.
Network equipment leader Cisco Systems Inc (CSCO.O: Quote, Profile, Research, Stock Buzz) fell 7.9 percent to $18.84 after Barclays Capital cut its price target to $23 from $27, citing a "deepening situation in financials" that could spread to other areas.
But Ciena's Smith said the increased caution does not mean actual business has turned appreciably worse, and telecommunications customers still need to upgrade their networks to deal with growing Internet traffic including online video.
"The fundamental capacity demands on the network, driven by new applications, continues to be robust despite the macroeconomic challenges," he said.
Customers have not over-invested in network infrastructure, unlike during the tech bubble years that ended around 2001, he added. He said current conditions are "profoundly different" from those in 2001. (Reporting by Ritsuko Ando, editing by Maureen Bavdek, Gerald E. McCormick, Richard Chang)
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