Ciena exceeds expectations with 2Q profit

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Ciena Corp. (Nasdaq: CIEN) posted a stronger second quarter than analysts expected.

In fiscal second quarter results released after market close Thursday, the maker of telecom equipment posted net income of $1.6 million, or a penny a share. First Call's survey of 11 analysts predicted a loss of 3 cents a share.

Second quarter revenue rose to $111.5 million, a sequential gain of 11 percent from $100.4 million in the first quarter, when Ciena basically broke even. The company, which makes systems for transporting fiber optic signals, saw revenue of $142.7 million in the second quarter of 1998.

Thursday's report should cheer investors concerned about Ciena's narrow revenue base in previous quarters. Fourteen customers generated Ciena's revenue in the quarter just ended, compared to just six in the year-earlier period. Ciena also had revenue from 50 services clients. "They are showing business is much more active now," said Jim Kedersha, analyst with SG Cowen Securities. "Ciena is winning a good share of new business."

Shares of Ciena have been trading in the 20s since Tellabs abandoned plans to buy the company last year. "The stock, however, is not without its risks," said Kedersha, who has a "strong buy" rating and a price target of $35 for the stock. "Ciena was a leader, then it was dogmeat and now business is bouncing back."

Ciena stock fell 2 1/4 to 26 3/8 in Thursday's trading prior to the earnings announcement. Of 14 analysts polled by Zack's Investment Research, nine maintain the equivalent of a "hold" rating on Ciena, five rate the stock a "moderate buy", four call it a "strong buy", and one has a "strong sell" advisory on the stock.