Ciena Reports 1Q LossCiena Reports 1Q Loss

Days after saying it will gain significant business in the metropolitan area optical networking space with its $900 million deal to buy ONI Systems Corp., Ciena Corp. on Thursday reported a loss of $70.6 million for the first quarter ended Jan. 31. It also said it expects revenue in the current quarter to be around $100 million, less than previously projected, based on indications of smaller-than-expected sales from its biggest customers.

Ciena has some metro area products that account for a small share of its overall revenue, but its main expertise is in optical switching and transmission gear for core and long-haul networks. In acquiring ONI, it gets a company that specializes in metro optical equipment and the opportunity to offer customers end-to-end optical networking platforms.

Ciena will exchange 0.7104 shares of Ciena common stock for each outstanding share of ONI Systems stock. The deal is expected to close in the second or third quarter, the companies said.

Because the deal isn't expected to close for a quarter or two, Ciena's revenue may decrease in the short term because of deferred sales of its metro area products. "There will be some short-term negative impacts because of this, but long term it's absolutely the right thing to do," says David Dunphy, principal analyst for optical infrastructure at Current Analysis. Once the deal closes and the companies have an opportunity to integrate their products, he says, "it's going to help Ciena go end to end and compete head to head with companies like Nortel."