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Ciena restructures manufacturing business

The optical-networking company says it is laying off 10 percent of its staff amid an increase in outsourcing and announces that it expects positive fourth-quarter results.

    Ciena announced Monday that it is laying off 10 percent of its staff amid slumping demand and an increase in outsourcing. The maker of optical-networking gear also said its fourth-quarter results are expected to beat Wall Street's current estimates.

    The company will cut 380 staff members, or around 10 percent of its staff, mostly from its manufacturing division.

    Ciena said it expects to record a charge of approximately $1.7 billion to reduce goodwill during the fourth quarter of fiscal 2001, related to its acquisition of Cyras Systems.

    The company also said it anticipates a charge of $15 million to $16 million in the current quarter as it consolidates some facilities and another charge of $5 million to $6 million in the first fiscal quarter of 2002 related to the job cuts.

    Ciena said it now sees fourth-quarter earnings of between 4 cents and 6 cents a share, excluding charges, on revenue of $367.8 million. Analysts surveyed by First Call were expecting the company to report a profit of 4 cents a share on revenue of $358 million.

    On a conference call with analysts, the company declined to give more details on forecasts for the fourth quarter or beyond, saying the conference call was meant to discuss the restructuring.

    "Today's real news is really about our work force prediction...We did want to provide you with some context; that's why we're providing you with fourth-quarter results," said CEO Gary Smith.

    Analysts expressed concerns that the restructuring may imply a slowdown in demand, especially since the company declined to comment on next year's forecasts.

    But management maintained that the restructuring was mostly a result of operational changes.

    "We're a victim of our own efficiencies. We don't need as much labor to produce as much as we did two years ago," Smith said. "It's not us looking further out and seeing a slackening in demand." He noted that the company had commented on over-capacity in its third-quarter report.

    Management said the company continues to gain market share from its competitors. It sees its restructuring as a way to break further away from the pack.

    "The things announced today will help Ciena ensure long-term financial strength and make us a leader in optical networking," Smith said.

    Ciena has been saying for some time that it plans to be one of the first companies to break out of the slump that has afflicted larger rivals such as Cisco Systems and Nortel Networks.