The Liberation of Ciena Must Begin Now

Implications: 1.      Fundamental “values” must be place in order to ensure a “value play.” 2.      Totally straight-shooting from the top leadership at Ciena has been lacking for a good number of years. 3.      A much higher level of trust must be in place, especially for the long-term needs of the large service providers.

Analysis:  The high level of dependency on Ciena’s CN 4200 and on CoreDirector products is the key concern.  The final straw for both industry analysts as well as the carriers could wind up being the purchase of World Wide Packets based on an apparently half-baked rationale that a firm contract was in place with AT&T.  As a result, the valuation of Ciena was perceived to be lower well before Ciena had adjusted its anticipated performance estimates.   

The Barron’s piece alluded to in the original source is correct in stating: “[The] opportunity [is there] for those with a longer view, who understand there is robust long-term demand for [Ciena’s] expertise as telecom carriers strive to keep their services relevant and improve their profitability.”  However, it only remains true if there is an adequate amount of confidence in the top leadership.  One too many acquisitions in Ciena’s history have proven to be rolls of the dice.  Couple this with the overall propensity to lowball expectations in general,  the well-documented strengths of its product line for future applications will have a limited impact on the general impression of the company.