Ciena, an optical equipment manufacturer, was a high-speed investor when it announced its performance in the third fiscal quarter of this year. It is estimated that its sales in the fourth fiscal quarter will be only $0.88 billion, much lower than the $1.04 billion in the same period last year. In fact, when the fourth fiscal quarter results were released on Thursday, Ciena reported sales of $971 million, which, despite a year-on-year decline, still excited investors.
When the US stock market opened on Thursday, Ciena’s share price rose by 17% to about US $50.50 at present, which is still far lower than US $73 at the beginning of this year, but it has reflected some positive views of investors on Ciena’s prospects for next year. In particular, Ciena seems to have overcome the most serious supply chain problems that seriously affected its performance in the third fiscal quarter. Jim Moylan, chief financial officer of Ciena, said that several suppliers were “quite unreliable” at that time, which disappointed them. Mike Genovese of Rosenblatt Securities believes that Texas Instruments, a major chip manufacturer in the United States, is also among them. Nevertheless, Ciena’s sales in the third fiscal quarter decreased by 12% to US $868 million, and its profits fell sharply, with its gross profit margin only 40%, down about 8.5 percentage points month on month.

How much change can three months bring. Although there is still a decline compared with the same period last year, the decline is much smaller. Ciena’s sales in the fourth fiscal quarter fell 6.8% year on year, with a gross profit margin of 45.2%, lower than 46.3% in the same period last year. Ciena achieved a net profit of about 57.6 million US dollars, down 44% year on year, compared with 96% in the previous quarter. For those supporters who were told of the disaster, the results were encouraging.
Smith said to analysts on the conference call: “This performance reflects the improvement of the supply chain in the second half of the fourth fiscal quarter, including that the number of integrated circuits we received from some suppliers exceeded expectations, and the number of parts we purchased in the open market also exceeded initial expectations.”
Analysts’ initial assessment was optimistic. Catharine Trebnick of MKM Partners said in a research report after the conference call that these figures were “impressive” and that her income was far higher than her own estimate of $850 million. She wrote: “The company benefited from the relaxation of the supply chain in the second half of the year and the strong demand for optical upgrading.”
In fact, part of the reason why investors are confident in Ciena is that it is located in one of the growing areas of the telecommunications industry. As operators and Internet companies upgrade their networks to withstand the proliferation of data traffic, spending on optical equipment is expected to rise in the coming years. Ciena continues to be highly recognized in terms of product competitiveness, especially in terms of 800G optical transmission technology.
According to Smith, the evidence of such demand and market share growth is Ciena’s huge order backlog of about 4.2 billion dollars. Smith said: “The 26% order growth this year is a very strong demand indicator. Many customers still want to get the equipment before we deliver it.”