By Johnathan Burns
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--The nation's largest data-networking companies and optical equipment makers continued to struggle during the fourth quarter as high-tech spending ran on end-of-year fumes.
A few companies showed strength relative to previous quarters, including optical switch maker Ciena Corp. (CIEN), which is expected to see a sequential increase in revenue, while switch maker Foundry Networks Inc. (FDRY) will post its highest sales results in more than five quarters.
But spending by enterprises and carriers remained weak on the whole, as Lucent Technologies Inc. (LU) hit what company officials believe to be a bottom point in quarterly revenue and optical component makers Corning Inc. (GLW) and JDS Uniphase Corp. (JDSU) saw their lowest sales totals in at least three years. Data-networking giant Cisco Systems Inc. (CSCO) is expected to post sequentially weaker sales.
Juniper Networks (JNPR), which sells large routers to service providers, is expected to lose a penny a share on revenue of $150.4 million in the fourth quarter, compared with earnings of 5 cents a share on revenue of $151 million a year ago, according to a Thomson First Call survey of analysts. The company reports Thursday after the close.
"We believe that Juniper may be benefiting from a possible carrier spending uptick outside the U.S. in the fourth quarter, particularly in Europe and Asia," said Lehman Brothers Inc. analyst Tim Luke. Lehman does not have an investment banking relationship with the company, and Luke does not own Juniper stock. "In the U.S., although aggregate carrier (capital spending) levels appear to be up significantly in the fourth quarter versus a very weak third quarter, we think most U.S. carriers are likely to underspend their 2002 budget dollars."
After spending freely in the late 1990s and into 2000, the economic slowdown and capital market shutdown forced carriers to drastically curtail equipment spending. Likewise for economic reasons, enterprises - or large businesses - also have reduced spending on switches, routers and related equipment and software in an effort to pinch pennies.
Cisco, the world's leading switch and router maker, is expected to earn 13 cents a share on revenue of $4.73 billion in its fiscal second quarter ending January, versus 9 cents on $4.82 billion a year ago.
Luke believes Cisco saw solid sales in November and early December, with more subdued sales toward the end of the year. He said Cisco will see slower to flattish sales in the U.S. enterprise market, which accounts for 40% to 45% of bookings. Sales in China are expected to be solid. He also expects that government spending - both federal and state - may have been slightly constrained in the quarter.
Luke does not own Cisco stock, and Lehman does not have an investment banking relationship with the company.
A Low For Lucent
Meanwhile, telecommunications equipment maker Lucent will have to rely on its wireless gear sales as the market for optical devices continues to suffer.
Lucent is expected to report a fiscal first-quarter loss of 21 cents a share on revenue of $2.11 billion, compared with a loss of 23 cents a share on revenue of $3.47 billion a year ago. Lucent's first quarter ended in December.
Lucent executives have said they believe the quarter will be the low point for revenue in fiscal 2003.
Weak carrier spending similarly has depressed sales at digital cross-connect maker Tellabs Inc. (TLAB), which is expected to post a fourth-quarter loss of 3 cents a share on sales of $283.3 million, compared with earnings of 3 cents a share on revenue of $470 million a year ago. It will be Tellabs' weakest quarter in terms of revenue in at least 15 quarters.
Ciena's fiscal first-quarter sales will be on a different trajectory, with revenue expected to be $66.8 million, up from $61.9 million the previous quarter. The company is expected to lose 14 cents a share, compared with a loss of 17 cents a share on revenue of $162.2 million a year ago. Ciena's first quarter ends in January.
Spending on optical equipment that goes into the long-haul portion of the network has been particularly constricted, knocking the wind out of companies such as Ciena, Tellabs and Lucent. Those companies, in turn, have stopped buying as many optical components to put into their systems from the likes of Corning and JDS Uniphase.
Corning also has been doubled over by a staggering drop in demand for its optical fiber, which has forced the company to close or mothball manufacturing facilities.
Corning is expected to post a loss of 9 cents a share in the fourth quarter on revenue of $777 million compared with a loss of 28 cents on revenue of $974 million a year ago. Corning's sales will be its lowest in at least 14 quarters.
JDS Uniphase will post its lowest quarterly sales results since 1999 in the company's fiscal second quarter ended in December. The company is expected to lose 5 cents a share on revenue of $152.5 million, compared with a loss of 2 cents a share on revenue of $289.1 million a year ago.
Networking equipment maker Foundry is expected to earn 6 cents a share on revenue of $83.5 million in the fourth quarter, compared with earnings of a penny a share and revenue of $65.4 million a year ago.
"We believe Foundry saw continued demand from the government and also from higher education," said Mark Sue, analyst with C.E. Unterberg Towbin. He owns no company stock and the firm has no investment banking relationship with the company. "Additionally, we believe Foundry saw strength in Japan and a return of activity in Europe during the quarter."
For its fiscal second quarter ended in December, switch maker Extreme Networks Inc. (EXTR) last week reported a loss of 17 cents a share on revenue of $90.2 million, compared with a loss of 9 cents a share on revenue of $109.1 million a year ago.
-By Johnathan Burns, Dow Jones Newswires; 201-938-2020; johnathan.burns@dowjones.com
(END) Dow Jones Newswires
01-16-03 1312ET
