Ciena cashes in on possible Qwest deal
After a nearly 24 percent surge today, stock in high-end network equipment provider Ciena rapidly approaches levels not seen in more than a year.
Today's spike reflects enthusiasm about the strength of sales for its newest switch product, optimism surrounding the company's fourth quarter earnings, and speculation that Ciena has signed high-speed network builder Qwest Communications International as a customer.
Ciena shares set a new 52-week high today by gaining 11.5 to 60.06.
A spokeswoman for Qwest declined to comment. Ciena, which counts Williams Communications among its customers, is expected to earn 2 cents a share when it reports earnings Friday, according to First Call.
Aside from the stock jump, the firm today announced it would extend equipment tests with European communications carrier Iaxis, a prior Ciena customer. Iaxis previously agreed to a contract to spend up to $200 million on Ciena equipment over the next three years.
Ciena, an optical networking pioneer, makes wave division multiplexing (WDM)-based equipment that communications companies use to stretch the capacity of their long-distance fiber-optic networks.
The company saw its stock value plummet late last summer as investors feared competing products made by larger industry players like LucentTechnologies would cut into Ciena's business.
But investors who bailed out would have missed a 300-percent jump since the beginning of the year. Ciena shares have doubled in value since mid-October.
Earlier this year, Ciena added new customers, saw its stock jump on analyst upgrades and made acquisitions that were viewed positively by the investor community.
The company also got a boost in May when it reported a second-quarter profit and announced further customer wins.
Signing Williams as a customer, announced last month, also was a big win for Ciena. That deal could be worth between $25 million and $50 million.
Positive customer announcements and optimism about Ciena's optical switching and bandwidth management product, currently in development, contributed to the run-up, according to Paul Silverstein, a senior analyst with BancBoston Robertson Stephens.
"My belief is that the optimism and stock move today is twofold: one, concern that Williams would back away from the [optical switch] product has been alleviated; and two, the speculation about Qwest," Silverstein said.
"The only issue with Ciena is competitive perception," he said. "Can they compete against the big boys? "How do you change those perceptions? You do that by winning new customers."
Silverstein, who has a "buy" rating on Ciena stock, expects the company to report quarterly revenue of $138 million and earnings that are in line with Wall Street's expectations.