- The Washington Times - Wednesday, March 27, 2002

Ciena Corp. said yesterday it will cut another 650 jobs, its third round of layoffs since November.
The nation's second-leading manufacturer of fiber-optic equipment said that cutting 22 percent of its work force will require the company to take a restructuring charge of $125 million to $135 million during the second quarter of its fiscal year.
Ciena Chief Executive Gary Smith said lower spending on fiber-optic equipment by telecommunications carriers forced the beleaguered Linthicum, Md., firm to cut more jobs.
"Clearly the industry continues to be very challenging," Mr. Smith said.
Ciena laid off 380 workers in November and another 400 workers on Feb. 5. Employment at the company has fallen to 2,300, down 38 percent from the 3,730 workers it employed before the initial layoffs Nov. 11.
The stream of layoffs at Ciena comes amid decreased demand for fiber-optic equipment. Ciena reported a $70.6 million loss for its fiscal first quarter, which ended Jan. 31, on revenue of $162.2 million.
Mr. Smith has predicted demand will remain soft during the second quarter, with revenue reaching an estimated $100 million.
He said two of Ciena's biggest customers indicated in February they were delaying or canceling orders that would have been filled during the second quarter.
He didn't identify the customers, but Ciena sells equipment to large companies including Qwest Communications International Inc. and long-distance provider Sprint Corp. It also markets to smaller long-distance carriers and competitive local-exchange carriers. Spending on telecommunications equipment by the smaller carriers fell from $30 billion in 2000 to $19 billion last year, and it could fall to $3.5 billion this year, said Susan Kalla, senior telecommunications analyst at Arlington investment banker Friedman, Billings, Ramsey and Co.
Spending cuts by big carriers such as Qwest and Sprint likely hurt Ciena even more, said Rick Schafer, senior telecommunications analyst at investment banker CIBC World Markets in Denver.
"In my opinion, they account for 50 to 60 percent of Ciena's business," he said. "The way Ciena was able to swim upstream for so long is by being leveraged to the only two carriers [Qwest and Sprint] that continued to spend."
In addition to the second-quarter charge related to its restructuring, Ciena said it expects to record a charge of $200 million to $225 million, primarily related to excess inventory.
The job cuts are expected to save Ciena up to $155 million annually, even though the company isn't likely to save any money as a result of the layoffs until its third quarter.
"They're doing stuff to bolster their arsenal and emerge stronger whenever the carriers do start to spend again," Mr. Schafer said.
Ciena said last month it will buy ONI Systems Corp., in San Jose, Calif., for $1.2 billion in stock and debt to broaden the range of fiber-optic equipment it can market. The transaction isn't final.
ONI Systems makes fiber-optic equipment that transports data over short distances. Ciena markets equipment to ship data over long distances.
"The quicker we broaden our product range, the better," Mr. Smith said.
More important, the acquisition also gives Ciena access to ONI's $400 million in cash on hand, Ms. Kalla said.
Ciena's stock closed higher yesterday on the Nasdaq Stock Market, up 5 cents to $8.40 a share. Despite the modest rise, the stock is down 46 percent since its close Jan. 2 of $15.59 a share.
Ciena said that it will pay the laid off workers through May 24 and that former employees will be eligible for severance packages and outplacement assistance.


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