Linthicum-based Ciena Corp. retrenches, cuts $8M in costs

Daily Record, The (Baltimore), Mar 22, 2006 by Joe Bacchus

Ciena Corp. hopes shifting some of its operations to Maryland will help solidify its future.The telecommunications infrastructure company said yesterday it will close its Shrewsbury, N.J., research and development division by the end of April. Ciena's Linthicum headquarters should add about 27 employees under the consolidation.

The company will also cut about 60 jobs and assign 25 employees to remote positions.Ciena spokeswoman Nicole Anderson said the changes signify a more integrated approach to the telecom business. She said in the past individual facilities focused on individual products.As the technologies start to blur - it doesn't make sense to focus solely on a product as much as the underlying technology, she said.Anderson said New Jersey was picked because its technologies are the easiest to transfer. Ciena also has facilities in Massachusetts, Georgia, Ontario and India. The India facility is the newest and should ultimately house approximately 300 employees. The company has about 600 employees in Maryland and more than 1,400 employees worldwide.In addition to streamlining business, the consolidation should also cut costs. Ciena estimates the trimming will save as much as $8 million annually, according to a release. The savings should take effect by the end of the fiscal second quarter, but the company expects as much as $8.1 million in one- time costs due to the transition.Ciena, once the victim of the bursting tech bubble, is coming off one of its best quarters. For the fiscal quarter ended Jan. 31 the company saw revenue of $120.4 million and a net loss of $6 million. Both are improvements over the same period last year, when the company had revenue of $94.7 million and a loss of $56.4 million.Still, analysts seem split on Ciena.Joseph Chiasson, an analyst with Susquehanna Financial Group, sees the facility consolidation as another solid step in Ciena's efforts to reduce operating costs. However, he said investors should be wary of Ciena's claims that the 62 layoffs will not affect current business.That always remains to be seen, no matter how much the company insists otherwise, Chiasson said.But he said the company has been doing well and he expects that trend to continue, though profitability is still at least a couple of years away.In an investor note released in early March, after Ciena announced its quarterly results, Lehman Brothers analyst Marcus L. Kupferschmidt said Ciena's last few quarters led him to raise his 2006 revenue estimates by 7 percent to about $583 million. Ciena had $427.3 million in revenue last year.Timothy Long, an analyst with Bank of America, seems much less enthusiastic. In an investor note, he estimates $518 million in revenue for Ciena in 2006. His 2007 revenue estimate of $609 million is also far below Kupferschmidt's estimate of $721 million. Long has a sell rating on the stock.Shares of Ciena closed down 12 cents to $4.96 yesterday on Nasdaq. The price reached $5.20 earlier in the day, close to its 52-week high of $5.47.