Ciena Target Lowered, Still a Hold

Maryland-based Ciena Corp. (CIEN - Analyst Report) is an original equipment manufacturer [OEM] of optical networking equipment, software and services. The company’s FlexSelect platform has been gaining momentum and we believe the acquisition of World Wide Packets will further strengthen its base.

However, Ciena’s sales cycle is lengthening as Tier 1 carriers proceed with caution, given the economic uncertainty. With the disappointing fourth-quarter results, we believe it would be difficult for the company to improve or maintain its growth rate given weak economic conditions. Ciena has provided a bleak outlook for the first quarter of 2009. As such, we are reducing our estimates for fiscal 2009 and 2010.

We maintain a Hold rating given the company’s diminished outlook but lower our six-month price target to $6, given the uncertain macroeconomic conditions. This price is based on P/E multiple of 0.03x our 2009 EPS estimate of $0.18.

Anita Mohata contributed to the report.

Read the full analyst report on CIEN