The economic slowdown has hit the telecommunications sector, but it’s nothing compared with the industry’s severe downturn of 2001.
“The big difference from that period is our customers are a lot more stable than they were back then,” said Tom Mock, senior vice president of strategic planning for Linthicum-based Ciena Corp. “I’d call this a bump in the road.”
Ciena, a manufacturer of advanced transmission and switching systems for fiber-optic communications networks, learned from the 2001 tech slump it needed to do more than just provide customers networking capacity.
“We had to focus on helping customers add value to their applications,” Mock said.
With customers ranging from service providers like AT&T and Verizon to institutions like Children’s Hospital Boston, the California Institute of Technology and the U.S. Department of Energy, Ciena builds infrastructure “highways” of communication networks worldwide.
The current slowdown has affected Ciena’s customers, as reported during the company’s third-quarter earnings call earlier this month. Ciena totaled $253 million in revenue in the third quarter, but said fourth-quarter revenue would dip to between $190 million to $210 million as customers delay their orders.
“We have recently begun to experience order delays from many of our Tier One service provider customers, which we attribute to their guarded approach to capital expenditures given the uncertain macroeconomic environment,” Ciena President and Chief Executive Officer Gary Smith said at the time.
Ciena said it hasn’t experienced any project or order cancellations.
As Mock said, this slowdown is a “bump in the road” compared with the tech crash of 2001, when Ciena’s revenue plunged from $1.6 billion in 2001 to $361 million in 2002.
“The customer base we’re dealing with is reasonably healthy,” Mock said.
Ciena’s foresight to expand its business after 2001 has put it in the healthy position it’s in today, said Alex Dannin, a Morningstar analyst who follows Ciena.
“Applications such as mobile video and social networking are increasingly interactive, making it more difficult for carriers to predict traffic type, volume growth and geographic intensity,” Dannin said. “Ciena anticipated these trends and designed its systems around an intelligent network design.”
Given the increasing demand for telecommunications and network products from consumers and businesses, Dannin doesn’t foresee trouble for Ciena down the road.
“We agree with Ciena’s assertion that increasing levels of data traffic will force carriers to resume upgrading their networks sooner rather than later,” Dannin said.
Customers and Products
- Ciena has more than 350 customers worldwide, with more than 25 percent of revenue coming from international customers.
- Ciena delivers products that help consumers use broadband and mobile data services and businesses increase work force mobility and communication.
Local Business
Ciena Corp. is part of The Examiner Top 10, a portfolio of some of the largest publicly traded companies in the Baltimore area. In an occasional series, The Examiner will profile each of the companies in the portfolio.
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