Ciena's Q3 income jumps to $23.6M despite slowness at U.S. Tier 1 service provider customers

Ciena reported that its fiscal third quarter 2015 income rose 19 percent to $23.6 million amidst a drop in revenue due to delays at a number of its large Tier 1 service provider customers.

The company earnings were $602.9 million, down from $603.6 million from the same period a year ago.

Analysts polled by Zacks Investment research had forecast adjusted net income of 34 cents per share and $627.8 million in revenue.

"This past quarter we saw a change in the timing of network implementations of certain customers, North American Tier 1 service providers, in particular, due to a number of customer-specific factors," said Gary Smith, CEO of Ciena during the earnings call, according to a Seeking Alpha transcript.

Smith added that he expects to see an uptick in customer orders in the coming quarter.

"We believe these factors are temporary in nature and do not represent a fundamental change in market demand or Ciena's overall momentum in any way," Smith said. "This is purely an issue of timing."

Other than saying the delays weren't from AT&T (NYSE: T), one of its largest customers, Smith said that one of its customers had some back office issues related to upgrading its metro network to next-gen optical platforms.

One of the things that's making Smith confident about the company's future is that by inking a deal to acquire Cyan, a provider of packet optical and SDN solutions. Ciena said that it is poised for new growth as more of its service provider customers like AT&T move to software definable networking (SDN) and network functions virtualization (NFV).

"With our acquisition of Cyan and the formation of the Blue Planet division, we are establishing a leader in SDN and NFV software, positioning Ciena for what is expected to be a significant opportunity," Smith said. "With customers naming Cyan as one of the top three orchestration software providers globally, according to Infonetics, we are working aggressively now to translate Cyan mindshare and Ciena incumbency into early footprint."

Within its product segment, Ciena reported Converged Packet Optical revenues continued to be a leader with $408 million in revenue, up from $382 million a year ago.

However, revenues declined year-over-year in its three other product segments -- Packet Networking, Optical Transport and Software and Services. Packet Networking and Optical Transport revenues were $57.2 million and $17.5 million, down from $69.5 and $31 million in the same period a year ago. The company also reported that Software and Services declined slightly $121.1 million to $120.2 million.   

Looking toward the fourth quarter, Ciena said it expects revenue to be in the range of $665 million to $700 million. Out of this figure, it expects revenue from the acquired Cyan business to be in the range of $40 million to $60 million.

In related news, Ciena also made some changes to its management team. It tapped François Locoh-Donou to be its new chief operating officer, effective Nov. 1. The 13-year company veteran most recently served as senior vice president of the global products group.

At the same time, Phillippe Morin announced that he's leaving the company to take on the COO role at test and measurement company Exfo later this year.

Shares of Ciena were listed at $22.71, down 27 cents, or 1.17 percent in Friday morning trading on the Nasdaq stock exchange.

For more:
- see the earnings release
- WSJ has this article
- see this Seeking Alpha transcript (sub. req.)

Special report: Wireline telecom earnings in the second quarter of 2015

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