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Ciena rebounds on upbeat presentation

Shares in the maker of fiber-optic equipment race ahead then level off to close up more than 2 percent, though the company made no announcements.

    Ciena's shares raced ahead as much as 10 percent Thursday before leveling off to close up more than 2 percent, even though the company made no announcements.

    The fiber-optic equipment maker's upbeat tone at an investment conference, coupled with some analyst notes, had investors assuming current earnings projections were on track.

    Shares in the company closed up $1.38, or more than 2 percent, to $54.75. Earlier, shares touched $59.25.

    Analysts and investors made a reverse interpretation of a new trend in which companies have been issuing warnings ahead of investment conferences to keep up with the U.S. Securities and Exchange Commission's regulation fair disclosure. Because Ciena didn't issue any statement before its appearance at a Merrill Lynch conference, analysts assumed it meant the company was doing well.

    That reassured investors who had lumped Ciena in with other optical equipment stocks Monday, sending its shares down 21 percent on that day alone. It fell along with Juniper Networks and ONI Systems--other fiber-optic companies that got slashed in Salomon Smith Barney's estimates for telecommunications equipment suppliers. Ciena shares had revived $4.56 to $57.94 Thursday.

    Ciena manufactures and develops optical networking systems for telecommunications networks and services.

    Merrill Lynch noted in a report that Ciena must be standing by its forecast because in the equipment maker's upbeat presentation at its Global Communications Conference in New York on Wednesday, Ciena didn't change its outlook.

    In mid-February, the company topped first-quarter earnings and revenue estimates. At that time, CEO Patrick Nettles said he expected Ciena's business to continue to grow faster than the overall market, and the company raised revenue projections for 2001.

    The company's business looks as strong now as it did six months ago, quite an achievement considering how competitors like Nortel Networks have issued multiple downward revisions to their forecasts.

    Ciena's saving grace has been the fact that it installs 80 percent to 90 percent of its equipment, so it knows how much customer inventory there is, according to the Merrill report.

    The company also mentioned during its presentation that six to 10 of its clients are performing enough work to total 10 percent of revenue each, a good sign for Ciena's diversity and ability to determine results, according to the research brief.

    ABN AMRO analyst Kenneth Leon also lauded Ciena in a research note Thursday.

    "We believe the Company has been gathering strong momentum since last March," Leon wrote. He has been tracking customer wins, and he said the company has an "open field running" with its CoreDirector intelligent optical switch, winning 90 percent of contracts over its competitors in the last 12 months.

    Lehman Brothers analyst Steven Levy also put out a positive report on the company Wednesday after a tire-kicking tour of the company.

    Levy said the company had a strong ability to predict revenue across new and existing product lines at the end of last quarter, and none of Ciena's customers have canceled or delayed orders in the past few months.

    "Our conclusion today is the same as it was one month ago; Ciena's fundamentals couldn't be stronger," Levy wrote.

    The stock may have gotten some extra mileage out of a report in Thursday's The Wall Street Journal that said Nortel's pain may be Ciena's gain. The article said Ciena has been making several sales wins over Nortel and other optical equipment suppliers.