I had a minor position in Ciena (0.9% of fund), and there customer base is quite different from a Cisco - Ciena ssells into telcos and they are rushing to outdo each other (AT&Ts, Verizons of the world) so I am not as worried about a near term slowdown in that space as I am in normal corporate America (routing). But now we have to forecast SIV exposure on a company by company basis? Cmon now. I said earlier this web of credit junk would spin into places we had no inkling of, but I certainly was thinking more along the lines of state governments, perhaps county governments, but not individual non financial companies. Ouch.
I did sell half of my smallish position in Ciena - not so much on that bad guidance or even the SIV exposure but near term perception about the stock. Again its a small position and I have some decent gains in this name - when I have more time to read into the earnings report and guidance I will decide if I will hold the remaining 125 shares. Today I sold 125 of 250 remaining shares in this name (which was once a major position in the fund). But if this is a new era where individual companies are going to report SIV exposure - well that just is going to be something altogether bad.
- Ciena Corp. on Thursday said profit more than doubled in the fiscal fourth quarter amid strengthening demand for its networking products.
- Yet shares of Ciena fell more than 8% in U.S. trades after Ciena issued a 2008 sales estimate slightly below Wall Street's forecast and reported a $13 million loss on a short-term investment known as an SIV.
- In the quarter ended Oct. 31, Linthicum, Md.-based Ciena reported net income of $30.4 million, or 30 cents a share, up from $13.1 million, or 14 cents a share. Revenue jumped 35% to $216.2 million from $160 million.
- Excluding the cost of stock options and other special items, Ciena would have earned $50.3 million, or 48 cents a share, compared with adjusted income of $22 million, or 24 cents a share, a year ago.
- On that basis, Ciena beat Wall Street's forecast. The company had been expected to earn 42 cents a share on sales of $211.3 million, according to the average estimate of analysts surveyed by Thomson Financial.
- For fiscal 2008, however, Ciena Chief Executive Gary Smith forecast that sales would rise 20% above the $779.8 million in revenue generated in fiscal 2007. Wall Street was expecting sales to rise 21% to $945.4 million.
- Aside from the conservative forecast, some investors may have been alarmed by the company's $13 million loss in so-called structured investment vehicles. Many SIV-related investment have gone sour in 2007 amid a widespread credit crunch earlier this year. On a conference call, executives assured analysts that the company's exposure to SIVs was "limited" to two specific investments and that the $13 million loss represented just 1% of Ciena's total cash on hand.
- The vendor has benefited from sales of equipment to big customers such as AT&T Inc., which are upgrading their networks to offer faster Internet connections and meet a surge in the number of music and video downloads.
Long Ciena in fund; no personal position
